Quick Referencer on Indian Accounting Standards · 15 Ind AS 115, Revenue from Contracts with...

Quick Referencer

on

Indian Accounting Standards

The Institute of Chartered Accountants of India (Set up by an Act of Parliament)

New Delhi

© THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording, or otherwise without prior permission, in writing, from the publisher.

This Quick Referencer has been formulated in accordance with the Ind AS notified by the Ministry of Corporate Affairs (MCA) as Companies (Indian Accounting Standards) Rules, 2015 vide Notification dated February 16, 2015 and other amendments finalised and notified till March 2019.

Edition : November 2019

Committee/Department : Ind AS Implementation Committee

E-mail : [email protected]

Website : www.icai.org

Price : INR 160/-

ISBN : 978-81-8441-970-2

Published by : The Publication Department on behalf of the Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi - 110 002.

Printed by : Sahitya Bhawan Publications, Hospital Road, Agra - 282 003.

Foreword

The need for converging to international financial reporting practices in India

is now being realised with the adoption of Indian Accounting Standards by

Indian companies that are converged International Financial Reporting

Standards. With incorporating the aspects of international financial reporting

framework and accounting practices, the financial statements of reporting

entities now provide a picture comparable on international level for the users.

This provides an ease in comparing the performance of multiple entities from

different countries.

Being one of the active formulators of the IFRS-converged Indian Accounting

Standards (Ind AS), the Institute of Chartered Accountants of India adheres

to the responsibility of successful and proper implementation of these

standards in the spirit they were formulated. For this purpose, the Institute of

Chartered Accountants of India (ICAI) is actively engaged in providing

guidance to members and other stakeholders through Ind AS Implementation

Committee.

The Ind AS Implementation Committee of ICAI has brought out this Quick

Referencer on Ind AS with an objective to provide a basic understanding of

Ind ASs for the members.

I acknowledge with thanks the sincere efforts of Ind AS Implementation

Committee, and all the members of the Committee for bringing out this

publication. I would like to thank CA. Nihar Niranjan Jambusaria, Chairman

and CA. Dayaniwas Sharma, Vice-Chairman of the Ind AS Implementation

Committee for leading the progress of this publication and to take active

efforts in providing regular guidance to the members on adoption and

implementation of Ind ASs. I am confident that this publication will be very

useful for the members of the Institute and other concerned stakeholders.

CA. Prafulla P. Chhajed President, ICAI

Preface

The implementation of the IFRS-converged Indian Accounting Standards (Ind

AS) has been driven by tireless efforts of the Institute of Chartered

Accountants of India (ICAI) to make sure that the financial reports of the

Indian entities are on par with the internationally accepted practices. The

importance on the adoption and implementation of these standards has been

stressed by ICAI through its various collective efforts in programs and

publications. With the phased adoption road map numerous entities are now

reporting their annual performances in accordance with the requirements of

these standards.

The Ind AS Implementation Committee has strived with its onerous efforts for

the implementation of these standards as per the crux and the spirit in which

they were formulated. The Ind AS Implementation Committee has conducted

countless programs to provide guidance to the members and other

stakeholders on the notified Ind AS. A great deal of publications such as

Educational Materials on Ind AS covering various issues are being

formulated and updated on a regular basis by the Committee. The Committee

has offered a helping hand to address the issues faced by the members

while transiting from the previous GAAP to Ind AS through the Ind AS

Technical Facilitation Group (ITFG). ITFG Clarification Bulletins are being

issued by the Ind AS Technical Facilitation Group (ITFG) which contain the

clarifications to the implementation issues reported to the group in a speedy

and timely manner. Regular batches for Certificate Course on Ind AS with

quarterly examinations are being conducted throughout the year and in

multiple locations throughout the nation.

Looking at the vast literature of the Indian Accounting Standards and the

practical problems of skimming through the entire literature when in need of

an aspect to be looked upon, the Committee progressed with the thought of

bringing in the ease of use and referral characteristic to this issue by creating

a publication that gives a glance on the basic aspects of applicable

standards in a summarised manner. This idea is realised in the form of Quick

Referencer on Indian Accounting Standards. This publication provides only a

glance through the applicable Ind ASs and for a better and detailed

understanding of Ind ASs, it is advisable go thoroughly through the entire text

of the Standards and publications such as Educational Materials and ITFG

Clarification Bulletins.

I am gratefully thankful to the Honourable President, CA. Prafulla Premsukh

Chhajed and the Vice-President, CA. Atul Kumar Gupta for providing us the

opportunity of bringing out this publication. I am also thankful to CA.

Dayaniwas Sharma, Vice-Chairman of Ind AS Implementation Committee

and all the members of the Ind AS Implementation Committee for their

valuable contribution in various endeavours of the Committee.

I would like to place on record appreciation of technical contribution made by

CA. Geetanshu Bansal, Secretary, Ind AS Implementation Committee and

CA. Choshal Patil in bringing out this publication. I would also like to thank

CA. Vidhyadhar Kulkarni, Head, Technical Directorate for his support.

I sincerely believe that this publication would help members and other

stakeholders to get a basic understanding of Ind ASs.

CA. Nihar Niranjan Jambusaria

Chairman

Ind AS Implementation Committee

Contents

Sl.

No.

Page No.

1 Ind AS 101, First-time Adoption of Indian Accounting

Standards

1

2 Ind AS 102, Share-based Payment 7

3 Ind AS 103, Business Combinations 13

4 Ind AS 104, Insurance Contracts 21

5 Ind AS 105, Non-current Assets Held for Sale and

Discontinued Operations

24

6 Ind AS 106, Exploration for and Evaluation of Mineral

Resources

26

7 Ind AS 107, Financial Instruments: Disclosures 29

8 Ind AS 108, Operating Segments 35

9 Ind AS 109, Financial Instruments 37

10 Ind AS 110, Consolidated Financial Statements 44

11 Ind AS 111, Joint Arrangements 48

12 Ind AS 112, Disclosure of Interest in Other Entities 50

13 Ind AS 113, Fair Value Measurement 53

14 Ind AS 114, Regulatory Deferral Account 56

15 Ind AS 115, Revenue from Contracts with Customers 59

16 Ind AS 116, Leases 65

17 Ind AS 1, Presentation of Financial Statements 75

18 Ind AS 2, Inventories 80

19 Ind AS 7, Statement of Cash Flows 83

20 Ind AS 8, Accounting Policies, Changes in Accounting

Estimates and Errors

86

21 Ind AS 10, Events after the Reporting Period 91

22 Ind AS 12, Income Taxes 95

23 Ind AS 16, Property, Plant and Equipment 100

24 Ind AS 19, Employee Benefits 105

25 Ind AS 20, Accounting for Government Grants and

Disclosure of Government Assistance

111

26 Ind AS 21, The Effects of Changes in Foreign Exchange

Rates

115

27 Ind AS 23, Borrowing Costs 120

28 Ind AS 24, Related Party Disclosures 122

29 Ind AS 27, Separate Financial Statements 128

30 Ind AS 28, Investments in Associates and Joint Ventures 130

31 Ind AS 29, Financial Reporting in Hyperinflationary

Economies

134

32 Ind AS 32, Financial Instruments: Presentation 139

33 Ind AS 33, Earnings per Share 144

34 Ind AS 34, Interim Financial Reporting 151

35 Ind AS 36, Impairment of Assets 156

36 Ind AS 37, Provisions, Contingent Liabilities and Contingent

Assets

161

37 Ind AS 38, Intangible Assets 167

38 Ind AS 40, Investment Property 173

39 Ind AS 41, Agriculture 177

40 List of applicable Indian Accounting Standards 179

41 Ind AS Implementation Initiatives 181

Ind AS 101, First-time Adoption of Indian Accounting Standards Ind AS 101 prescribes the accounting principles for first-time adoption of

Indian Accounting Standards (Ind AS). It lays down various ‘transition’

requirements when a company adopts Ind AS for the first time, i.e., a move

from Accounting Standards (Indian GAAP) to Ind AS. Conceptually, the

accounting under Ind AS should be applied retrospectively at the time of

transition to Ind AS. However, to ease the process of transition, Ind AS 101

provides certain exemptions from retrospective application of Ind ASs. The

exemptions are broadly categorised into those which are mandatory in nature

(i.e., cases where the company is not allowed to apply Ind AS

retrospectively) and those which are voluntary in nature (i.e., the company

may elect not to apply certain requirements of Ind AS retrospectively). Ind AS

101 also prescribes presentation and disclosure requirements to explain the

transition to the users of financial statements including explaining how the

transition from Indian GAAP to Ind AS affected the company’s financial

position, financial performance and cash flows. Ind AS 101 does not provide

any exemption from the disclosure requirements in other Ind ASs.

Definitions

Ind AS 101 defines various terms used in the Standard. These are contained

in Appendix A to Ind AS 101. These definitions are important to understand

the requirements of Ind AS 101. Some of the key definitions are given below:

Date of transition to Ind AS: The beginning of the earliest period for which

an entity presents full comparative information under Ind AS in first Ind AS

financial statements.

Deemed cost: An amount used as a surrogate for cost or depreciated cost at

a given date. Subsequent depreciation or amortisation assumes that the

entity had initially recognised the asset or liability at the given date and that

its cost was equal to the deemed cost.

First Ind AS financial statements: The first annual financial statements in

which an entity adopts Ind AS, by an explicit and unreserved statement of

compliance with Ind ASs.

First Ind AS reporting period: The latest reporting period covered by an

entity’s first Ind AS financial statements.

Quick Referencer on Ind AS

2

First-time adopter: An entity that presents its first Ind AS financial

statements.

Opening Ind AS balance sheet: An entity’s balance sheet at the date of

transition to Ind ASs.

Previous GAAP: The basis of accounting that a first-time adopter used for

its statutory reporting requirements in India immediately before adopting Ind

ASs. For instance, companies required to prepare their financial statements

in accordance with Section 133 of the Companies Act, 2013, shall consider

those financial statements as previous GAAP financial statements.

Objective

To ensure that an entity’s first Ind AS financial statements, and its interim

financial reports for part of the period covered by those financial statements,

contain high quality information that:

(a) is transparent and comparable over all periods presented;

(b) provides a suitable starting point for accounting in accordance with Ind

ASs; and

(c) its cost does not exceed the benefits.

Scope

An entity shall apply Ind AS 101 in its first Ind AS financial statements and

each interim financial report, if any, that it presents in accordance with Ind

AS 34, Interim Financial Reporting, for part of the period covered by its first

Ind AS financial statements.

Opening Ind AS Balance Sheet

An entity shall prepare and present an opening Ind AS Balance Sheet at the

date of transition to Ind ASs. This is the starting point for its accounting in

accordance with Ind ASs.

Accounting policies

An entity shall use the same accounting policies in its opening Ind AS

Balance Sheet and throughout all periods presented in its first Ind AS

financial statements. These accounting policies should comply with each Ind

AS effective at the end of its first Ind AS reporting period.


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Subject to mandatory exceptions and voluntary exemptions (if elected) an

entity shall, in its opening Ind AS Balance Sheet:

(a) recognise all assets and liabilities whose recognition is required by Ind

ASs;

(b) not recognise items as assets or liabilities if Ind ASs do not permit

such recognition;

(c) reclassify items that it recognised in accordance with previous GAAP

as one type of asset, liability or component of equity, but are a

different type of asset, liability or component of equity in accordance

with Ind ASs; and

(d) apply Ind ASs in measuring all recognised assets and liabilities.

The accounting policies in opening Ind AS Balance Sheet may differ from

those that it used for the same date using previous GAAP. The resulting

adjustments arise from events and transactions before the date of transition

to Ind ASs, which shall be recognised directly in retained earnings (or, if

appropriate, another category of equity) at the date of transition to Ind ASs.

Estimates

In preparing Ind AS estimates at the date of transition to Ind ASs

retrospectively, the entity must use the inputs and assumptions that had

been used to determine previous GAAP estimates as of that date (after

adjustments to reflect any differences in accounting policies). The entity is

not permitted to use information that became available only after the

previous GAAP estimates were made except to correct an error.

Presentation and Disclosure

Ind AS 101 does not provide exemptions from the presentation and

disclosure requirements in other Ind ASs. This Ind AS requires that an

entity’s first Ind AS financial statements shall include at least three balance

sheets, two statements of profit and loss, two statements of cash flows and

two statements of changes in equity and related notes, including comparative

information for all statements presented.

Ind AS 101 requires disclosures that explain how the transition from previous

GAAP to Ind AS affected the entity's reported financial position, financial

performance and cash flows. This includes:


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1. reconciliations of equity reported under previous GAAP to equity under

Ind AS both (a) at the date of transition to Ind ASs and (b) the end of

the last annual period reported under the previous GAAP;

2. reconciliations of total comprehensive income for the last annual

period reported under previous GAAP to total comprehensive income

under Ind ASs for the same period;

3. explanation of material adjustments that were made, in adopting Ind

ASs for the first time, to the balance sheet statement of

comprehensive income and statement of cash flows;

4. if errors in previous GAAP financial statements were discovered in the

course of transition to Ind ASs, those must be separately disclosed;

5. if the entity recognised or reversed any impairment losses in

preparing its opening Ind AS balance sheet these must be disclosed;

and

6. appropriate explanations if the entity has elected to apply any of the

specific recognition and measurement exemptions permitted under Ind

AS 101– for instance, if it used fair values as deemed cost.

Explanation of transition to Ind ASs

Ind AS 101 requires that an entity should explain how the transition from

previous GAAP to Ind ASs affected its reported balance sheet, financial

performance and cash flows.

Exceptions to the retrospective application of other Ind ASs

Ind AS 101 prohibits retrospective application of some aspects of other Ind

ASs, i.e., provides mandatory exception in relation to the following:

estimates;

derecognition of financial assets and financial liabilities;

hedge accounting;

non-controlling interests;

classification and measurement of financial assets;

impairment of financial assets;


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embedded derivatives; and

government loans.

An entity’s estimates in accordance with Ind ASs at the date of transition to

Ind ASs should be consistent with estimates made for the same date in

accordance with previous GAAP (after adjustments to reflect any difference

in accounting policies), unless there is objective evidence that those

estimates were in error.

Further, Ind AS 101 provides the optional exemptions in context of some

requirements of Ind ASs where it has been felt that the retrospective

application could be difficult or could result in undue cost exceeding any

benefits to users. An entity shall not apply these exemptions by analogy to

other items. An entity may elect to use one or more of the exemptions in

relation to the following:

business combinations;

share-based payment transactions;

insurance contracts;

deemed cost;

leases;

cumulative translation differences;

long term foreign currency monetary items;

investments in subsidiaries, joint ventures and associates;

assets and liabilities of subsidiaries, associates and joint ventures;

compound financial instruments;

designation of previously recognised financial instruments;

fair value measurement of financial assets or financial liabilities at

initial recognition;

decommissioning liabilities included in the cost of property, plant and

equipment;

financial assets or intangible assets accounted for in accordance with

Appendix D to Ind AS 115 (Service Concession Arrangements);


6

borrowing costs;

extinguishing financial liabilities with equity instruments;

severe hyperinflation;

joint arrangements;

stripping costs in the production phase of a surface mine;

designation of contracts to buy or sell a non-financial item;

revenue;

non-current assets held for sale and discontinued operations; and

foreign currency transactions and advance consideration.


7

Ind AS 102, Share-based Payment The objective of this Standard is to specify the financial reporting by an entity

when it undertakes a share-based payment transaction. In particular, it

requires an entity to reflect in its profit or loss and financial position the

effects of share-based payment transactions, including expenses associated

with transactions in which share options are granted to employees. Further,

goods or services received in a share-based payment transaction are

measured at fair value.

Share-based payment arrangement is an agreement between the entity (or

another group entity or any shareholder of any group entity) and another party

(including an employee) that entitles the other party to receive:

(a) cash or other assets of the entity for amounts that are based on the price

(or value) of equity instruments (including shares or share options) of the

entity or another group entity, or

(b) equity instruments (including shares or share options) of the entity or

another group entity, provided the specified vesting conditions, if any, are

met.

Share-based payment transaction is a transaction in which the entity:

(a) receives goods or services from the supplier of those goods or services

(including an employee) in a share-based payment arrangement, or

(b) incurs an obligation to settle the transaction with the supplier in a share-

based payment arrangement when another group entity receives those

goods or services.

Vest means to become an entitlement. Under a share-based payment

arrangement, a counterparty’s right to receive cash, other assets or equity

instruments of the entity vests when the counterparty’s entitlement is no longer

conditional on the satisfaction of any vesting conditions.

Recognition

An entity shall recognise the goods or services received or acquired in a

share-based payment transaction when it obtains the goods or as the

services are received. The entity shall recognise a corresponding increase in

equity if the goods or services were received in an equity-settled share-based payment transaction, or a liability if the goods or services were

acquired in a cash-settled share-based payment transaction.


8

When the goods or services received or acquired in a share-based payment

transaction do not qualify for recognition as assets, they should be

recognised as expenses.

The Standard sets out measurement and specific requirements for following

types of share-based payment transactions:

(a) equity-settled share-based payment transactions, in which the entity

(a) receives goods or services as consideration for its own equity

instruments (including shares or share options) or equity instruments

(including shares or share options) of another group entity, or (b)

receives goods or services but has no obligation to settle the

transaction with the supplier.

(b) cash-settled share-based payment transactions, in which the entity

acquires goods or services by incurring a liability to transfer cash or

other assets to the supplier of those goods or services for amounts

that are based on the price (or value) of equity instruments (including

shares or share options) of the entity or another group entity.

Equity-settled share-based payment transactions

For equity-settled share-based payment transactions, the entity shall

measure the goods or services received, and the corresponding increase in

equity, directly, at the fair value of the goods or services received, unless

that fair value cannot be estimated reliably. If the entity cannot estimate

reliably the fair value of the goods or services received, the entity should

measure their value and the corresponding increase in equity, indirectly, by

reference to the fair value of the equity instruments granted.

Furthermore:

(a) for transactions with employees and others providing similar services,

the entity is required to measure the fair value of the services received

by reference to the fair value of the equity instruments granted,

because typically it is not possible to estimate reliably the fair value of

the services received. The fair value of those equity instruments shall

be measured at grant date.

(b) for transactions with parties other than employees, there shall be a

rebuttable presumption that the fair value of the goods or services

received can be estimated reliably. That fair value shall be measured


9

at the date the entity obtains the goods or the counterparty renders

service. In rare cases, if the entity rebuts this presumption because it

cannot estimate reliably the fair value of the goods or services

received, the entity shall measure the goods or services received and

the corresponding increase in equity, indirectly, by reference to the fair

value of the equity instruments granted, measured at the date the

entity obtains the goods or the counterparty renders service.

(c) for goods or services measured by reference to the fair value of the

equity instruments granted, the Standard specifies that vesting

conditions, other than market conditions, are not taken into account

when estimating the fair value of the shares or share options at the

measurement date. Instead, vesting conditions (other than market

conditions) shall be taken into account by adjusting the number of

equity instruments included in the measurement of the transaction

amount so that, ultimately, the amount recognised for goods or

services received as consideration for the equity instruments granted

shall be based on the number of equity instruments that eventually

vest. Hence, on a cumulative basis, no amount is recognised for goods

or services received if the equity instruments granted do not vest

because of failure to satisfy a vesting condition (other than market

condition).

(d) an entity shall measure the fair value of equity instruments granted at

the grant date, based on market prices if available, taking into account

the terms and conditions upon which those equity instruments were

granted subject to certain requirements specified in the Standard. If

market prices are not available, the entity shall estimate the fair value

of the equity instruments granted using a valuation technique to

estimate what the price of those equity instruments would have been

on the measurement date in an arm’s length transaction between

knowledgeable and willing parties.

Cash-settled share-based payment transactions

For cash-settled share-based payment transactions, the entity shall measure

the goods or services acquired and the liability incurred at the fair value of

the liability subject to certain requirements. Until the liability is settled, the

entity shall remeasure the fair value of the liability at the end of each


10

reporting period and at the date of settlement, with any changes in fair value

recognised in profit or loss for the period.

Share-based payment transactions with cash alternatives

For share-based payment transactions in which the terms of the arrangement

provide either the entity or the counterparty with the choice of whether the

entity settles the transaction in cash (or other assets) or by issuing equity

instruments, the entity should account for that transaction, or the

components of that transaction, as:

a) a cash-settled share-based payment transaction if, and to the extent

that, the entity has incurred a liability to settle in cash or other assets,

or

b) an equity-settled share based payment transaction if, and to the extent

that, no such liability has been incurred.

Thus, grants in which the counterparty has the choice of equity or cash

settlement are accounted for as compound instruments. Therefore, the entity

accounts for a liability component and a separate equity component.

However, the classification of grants in which the entity has the choice of

equity or cash settlement depends on whether the entity has the ability and

intent to settle in shares.

Modifications and cancellations of employee transactions

— In case of modification to the terms and conditions on which equity

instruments were granted, the entity recognises, as a minimum, the

goods or services measured at the grant date fair value of equity

instruments. In addition, the entity recognises effects of modifications

that increase the total fair value of the share-based payment

arrangement or are otherwise beneficial to the employee. Any

decrease in fair value is ignored. Replacements are accounted for as

modifications.

— The entity accounts for the cancellation or settlement as an

acceleration of vesting.


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Group share-based payment arrangements

A share-based payment transaction may be settled by another group entity

(or a shareholder of any group entity) on behalf of the entity receiving or

acquiring the goods or services. The Standard also applies to an entity that:

(a) receives goods or services when another entity in the same group (or

a shareholder of any group entity) has the obligation to settle the

share-based payment transaction, or

(b) has an obligation to settle a share-based payment transaction when

another entity in the same group receives the goods or services unless

the transaction is clearly for a purpose other than payment for goods

or services supplied to the entity receiving them.

A receiving entity that has no obligation to settle the transaction

accounts for the share-based payment transaction as equity-settled.

A settling entity classifies a share-based payment transaction as

equity-settled if it is obliged to settle in its own equity instruments;

otherwise, it classifies the transaction as cash-settled.

Share-based payment transactions with a net settlement feature for withholding tax obligations

The terms of a share-based payment arrangement may permit or require the

entity to withhold the number of equity instruments equal to the monetary

value of the employee’s tax obligation from the total number of equity

instruments that otherwise would have been issued to the employee upon

exercise (or vesting) of the share-based payment, i.e. the share-based

payment arrangement has a ‘net settlement feature’. As an exception, such

transactions shall be classified in its entirety as an equity-settled share-

based payment transaction if it would have been so classified in the absence

of the net settlement feature.

The payment made shall be accounted for as a deduction from equity for the

shares withheld, except to the extent that the payment exceeds the fair value

at the net settlement date of the equity instruments withheld.

The exception does not apply to:

a share-based payment arrangement with a net settlement feature for

which there is no obligation on the entity under tax laws or regulations


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to withhold an amount for an employee’s tax obligation associated with

that share-based payment; or

any equity instruments that the entity withholds in excess of the

employee’s tax obligation associated with the share-based payment

(i.e. the entity withheld an amount of shares that exceeds the

monetary value of the employee’s tax obligation). Such excess shares

withheld shall be accounted for as a cash-settled share-based

payment when this amount is paid in cash (or other assets) to the

employee.

Disclosures

An entity shall disclose information that enables users of the financial

statements to understand –

— the nature and extent of share-based payment arrangements that

existed during the period;

— how the fair value of the goods or services received, or the fair value

of the equity instruments granted, during the period was determined;

— the effect of share-based payment transactions on the entity’s profit or

loss for the period and on its financial position.


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Ind AS 103, Business Combinations

Business is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants.

Business combination is a transaction or other event in which an acquirer obtains control of one or more businesses. Transactions sometimes referred to as ‘true mergers’ or ‘mergers of equals’ are also business combinations as that term is used in this Ind AS.

Ind AS 103 must be applied when accounting for business combinations but does not apply to (1) formation of a joint venture; (2) The acquisition of an asset or group of assets that is not a business, although general guidance is provided on how such transactions should be accounted; and (3) acquisition by an investment entity, as defined in Ind AS 110, Consolidated Financial Statements, of an investment in a subsidiary that is required to be measured at fair value through profit or loss. Appendix C to Ind AS 110 deals with accounting for combination of entities or businesses under common control.

Determining whether a transaction is a business combination:

• Business combinations can occur in various ways, such as by transferring cash, incurring liabilities, issuing equity instruments (or any combination thereof), or by not issuing consideration at all (i.e. by contract alone)

• Business combinations can be structured in various ways to satisfy legal, taxation or other objectives, including one entity becoming a subsidiary of another, the transfer of net assets from one entity to another or to a new entity.

• The business combination must involve the acquisition of a business, which generally has three elements:

₋ Inputs – an economic resource (e.g. non-current assets, intellectual property) that creates outputs when one or more processes are applied to it

₋ Process – a system, standard, protocol, convention or rule that when applied to an input or inputs, creates outputs (e.g. strategic management, operational processes, resource management)


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₋ Output – the result of inputs and processes applied to those inputs.

The acquisition method

An entity should account for each business combination by applying the

acquisition method, which requires:

(a) identifying the acquirer;

(b) determining the acquisition date;

(c) recognising and measuring the identifiable assets acquired, the

liabilities assumed and any non-controlling interest in the acquiree;

and

(d) recognising and measuring goodwill or a gain from a bargain

purchase.

For each business combination, one of the combining entities should be

identified as the acquirer.

The acquirer should identify the acquisition date, which is the date on which

it obtains control of the acquiree.

Recognising and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquire

Recognition principle

As of the acquisition date, the acquirer should recognise, separately from

goodwill, the identifiable assets acquired, the liabilities assumed and any

non-controlling interest in the acquiree.

Measurement principle

The acquirer should measure the identifiable assets acquired and the

liabilities assumed at their acquisition date fair values.

The acquirer should measure at the acquisition date, components of non-

controlling interest in the acquiree that are present ownership interests and

entitle their holders to a proportionate share of the entity’s net assets in the

event of liquidation at either:

(a) fair value; or


15

(b) the present ownership instruments’ proportionate share in the

recognised amounts of the acquiree’s identifiable net assets.

All other components of non-controlling interests should be measured at their

acquisition date fair values, unless another measurement basis is required by

Ind AS.

Exception to the recognition principle

Contingent liabilities The acquirer recognises a contingent liability assumed in a business combination at the acquisition date if it is a present obligation that arises from past events and its fair value can be measured reliably, even if it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation.

Exceptions to both the recognition and measurement principles

Income taxes The acquirer shall recognise and measure a deferred tax asset or liability arising from the assets acquired and liabilities assumed in a business combination and account for the potential tax effects of temporary differences and carry-forwards of an acquiree that exist at the acquisition date or arise as a result of the acquisition in accordance with Ind AS 12.

Employee benefits The acquirer shall recognise and measure a liability (or asset, if any) related to the acquiree’s employee benefit arrangements in accordance with Ind AS 19, Employee Benefits.

Indemnification assets If the indemnification relates to an asset or a liability that is recognised at the acquisition date and measured at its acquisition-date fair value, the acquirer shall recognise the indemnification asset at the acquisition date measured at its acquisition-date fair value.

Leases in which acquiree is the lessee

The acquirer shall recognise right-of-use assets and lease liabilities for leases identified in accordance with Ind AS 116, Leases in which the acquiree is the lessee.


16

The acquirer shall measure the lease liability at the present value of the remaining lease payments as if the acquired lease were a new lease at the acquisition date. The acquirer shall measure the right-of-use asset at the same amount as the lease liability, adjusted to reflect favourable or unfavourable terms of the lease when compared with market terms.

Exceptions to measurement principle

Reacquired rights The acquirer shall measure the value of a

reacquired right recognised as an intangible

asset on the basis of the remaining contractual

term of the related contract regardless of

whether market participants would consider

potential contractual renewals when measuring

its fair value.

Share-based

payments

The acquirer shall measure a liability or an

equity instrument related to share-based

payment transactions of the acquiree or the

replacement of an acquiree’s share-based

payment transactions with share-based payment

transactions of the acquirer in accordance with

the method in Ind AS 102, Share-based

Payment, at the acquisition date.

Asset held for sale The acquirer shall measure an acquired non-

current asset (or disposal group) that is

classified as held for sale at the acquisition date

in accordance with Ind AS 105, Non-current

Assets Held for Sale and Discontinued

Operations, at fair value less costs to sell.

Recognising and measuring goodwill or a gain from a bargain purchase

Goodwill is measured as the difference between the consideration

transferred in exchange for the net of the acquisition-date amounts of the

identifiable assets acquired and the liabilities assumed.


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Bargain purchase

In extremely rare circumstances, an acquirer will make a bargain purchase in

a business combination, where the value of acquired identifiable assets and

liabilities exceeds the consideration transferred; the acquirer shall recognise

a gain (bargain purchase). The gain shall be recognised by the acquirer in

Other Comprehensive Income on the acquisition date and accumulate the

same in equity as capital reserve, if there exists a clear evidence of the

underlying reasons for classifying the business combination as a bargain

purchase.

If there does not exist clear evidence of the underlying reasons for classifying

the business combination as a bargain purchase, then the gain shall be

recognised directly in equity as capital reserve.

Reverse Acquisitions

A reverse acquisition occurs when the entity that issues securities (the legal

acquirer) is identified as the acquiree for accounting. The entity whose equity

interests are acquired (the legal acquiree) must be the acquirer for

accounting purposes for the transaction to be considered a reverse

acquisition.

Applying the acquisition method to particular types of business combinations

(I) A business combination achieved in stages

The acquirer shall remeasure its previously held equity interest in the

acquiree at its acquisition-date fair value and recognise the resulting gain or

loss in profit or loss or other comprehensive income, as appropriate.

(II) A business combination achieved without the transfer of

consideration

The acquirer shall attribute to the owners of the acquiree the amount of the

acquiree’s net assets recognised in accordance with this Ind AS. In other

words, the equity interests in the acquiree held by parties other than the

acquirer are a non-controlling interest in the acquirer’s post-combination

financial statements even if the result is that, all of the equity interests in the

acquiree are attributed to the non-controlling interest.


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Measurement period

If the initial accounting for business combination is incomplete by the end of

the reporting period in which the combination occurs, the acquirer shall

report in its financial statements provisional amounts for the items for which

the accounting is incomplete.

During the measurement period, the acquirer shall retrospectively adjust the

provisional amounts recognised and additional assets or liabilities that

existed as of the acquisition date to reflect new information obtained.

The measurement period ends as soon as the acquirer receives the

information it was seeking about facts and circumstances that existed as of

the acquisition date or learns that more information is not obtainable.

However, the measurement period shall not exceed one year from the

acquisition date.

Subsequent measurement and accounting of specific items

In general, an acquirer shall subsequently measure and account for assets

acquired, liabilities assumed or incurred and equity instruments issued in a

business combination in accordance with other applicable Ind AS for those

items, depending on their nature. However, Ind AS 103 provides guidance on

subsequently measuring and accounting for the following assets acquired,

liabilities assumed or incurred and equity instruments issued in a business

combination:

(a) reacquired rights,

(b) contingent liabilities recognised as of the acquisition date,

(c) indemnification assets,

(d) contingent consideration.

Disclosures

The acquirer shall disclose information of a business combination that occurs

either:

during the current reporting period; or

after the end of the reporting period but before the financial statements

are approved for issue.


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The Standard requires the acquirer to disclose information for each business

combination that occurs during the reporting period such as the name and a

description of the acquiree, the acquisition date, the percentage of voting

equity interests acquired and other disclosures as prescribed in the standard.

Business combination of entities under common control

Common control business combination means a business combination involving entities or businesses in which all the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory.

Business combinations involving entities or businesses under common

control shall be accounted for using the pooling of interests method.

The pooling of interest method is considered to involve the following:

(i) The assets and liabilities of the combining entities are reflected at their

carrying amounts;

(ii) No adjustments are made to reflect fair values, or recognize any new

assets or liabilities. The only adjustments that are made are to

harmonise accounting policies; and

(iii) The financial information in the financial statements in respect of prior

periods should be restated as if the business combination had

occurred from the beginning of the preceding period in the financial

statements, irrespective of the actual date of the combination.

However, if business combination had occurred after that date, the

prior period information shall be restated only from that date.

As a consideration for the business combination, securities shall be recorded

at nominal value and assets other than cash shall be considered at their fair

values.

The balance of the retained earnings appearing in the financial statements of

the transferor is aggregated with the corresponding balance appearing in the

financial statements of the transferee. Alternatively, it is transferred to

General Reserve, if any.

The identity of the reserves shall be preserved and shall appear in the

financial statements of the transferee in the same form in which they

appeared in the financial statements of the transferor.


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The difference, if any, between the amount recorded as share capital issued

plus any additional consideration in the form of cash or other assets and the

amount of share capital of the transferor shall be transferred to capital

reserve and should be presented separately from other capital reserves with

disclosure of its nature and purpose in the notes.

The following disclosures shall be made in the first financial statements

following the business combination:

(a) names and general nature of business of the combining entities;

(b) the date on which the transferor obtains control of the transferee;

(c) description and number of shares issued, together with the percentage

of each entity’s equity shares exchanged to effect the business

combination; and

(d) the amount of any difference between the consideration and the value

of net identifiable assets acquired, and the treatment thereof.


21

Ind AS 104, Insurance Contracts The objective of this Standard is to specify the financial reporting for

insurance contracts by any entity that issues such contracts (described as an

insurer).

In particular, this Ind AS requires:

(a) limited improvements to accounting by insurers for insurance

contracts;

(b) disclosure that identifies and explains the amounts in an insurer’s

financial statements arising from insurance contracts and helps users

of those financial statements understand the amount, timing and

uncertainty of future cash flows from insurance contracts.

Definitions

Insurance contract is a contract under which one party (the insurer) accepts

significant insurance risk from another party (the policyholder) by agreeing to

compensate the policyholder if a specified uncertain future event (the insured

event) adversely affects the policyholder.

Insurance risk is any risk, other than financial risk, transferred from the

holder of a contract to the issuer.

Insured event is an uncertain future event that is covered by an insurance

contract and creates insurance risk.

Insurer is the party that has an obligation under an insurance contract to

compensate a policyholder if an insured event occurs.

Policyholder is a party that has a right to compensation under an insurance

contract if an insured event occurs.

The Standard applies to:

— all insurance contracts (including reinsurance contracts) that the entity

issues;

— reinsurance contracts that entity holds;

— financial instruments that entity issues with a discretionary

participation feature. Ind AS 107, Financial Instruments: Disclosures,

requires disclosure about financial instruments, including financial

instruments that contain such features.


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The Standard exempts an insurer from some requirements of other Ind AS.

However, the Standard:

(a) prohibits provisions for possible claims under contracts that are not in

existence at the end of the reporting period (such as catastrophe and

equalisation provisions);

(b) requires a test for the adequacy of recognised insurance liabilities and

an impairment test for reinsurance assets;

(c) requires an insurer to keep insurance liabilities in its statement of

financial position until they are discharged or cancelled, or expire, and

not to offset (i) insurance liabilities against related reinsurance assets

(ii) income/expenses from reinsurance contract against

expense/income from related insurance contract.

This Standard will also not be applied to

— product warranties issued directly by a manufacturer, dealer or retailer;

— employers’ assets and liabilities under employee benefit plans &

retirement benefit obligations reported by defined benefit retirement

plans;

— contractual rights or contractual obligations that are contingent on the

future use of, or right to use, a non-financial item;

— financial guarantee contracts unless the issuer entity has previously

asserted explicitly that it regards such contracts as insurance contracts

and has used accounting applicable to insurance contracts, in which

case the issuer entity may elect to (i) apply either Ind AS 32, Ind AS

107 and Ind AS 109 or this Standard to such contracts (ii) may make

that election contract by contract, but the election for each contract is

irrevocable;

— contingent consideration payable or receivable in a business

combination;

— direct insurance contracts that the entity holds as a policyholder (other

than reinsurance contracts that entity holds).

The Ind AS permits an insurer to change its accounting policies for insurance

contracts only if the change makes the financial statements more relevant

and no less reliable, or more reliable and no less relevant. In particular, an


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insurer may continue any of the following practices, although it may continue

using accounting policies that involve them:

(a) measuring insurance liabilities on an undiscounted basis;

(b) measuring contractual rights to future investment management fees at

an amount that exceeds their fair value as implied by a comparison

with current fees charged by other market participants for similar

services;

(c) using non-uniform accounting policies for the insurance contracts of

subsidiaries.

The Ind AS permits an insurer to change its accounting policies so that it re-

measures designated insurance liabilities to reflect current market interest

rates and recognises changes in those liabilities in profit or loss. Without this

permission, an insurer would have been required to apply the change in

accounting policies consistently to all similar liabilities.

The Ind AS requires disclosure to help users understand:

(a) the amounts in the insurer’s financial statements that arise from

insurance contracts;

(b) the nature and extent of risks arising from insurance contracts.


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Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations The objective of this Standard is to specify the accounting for assets held for

sale, and the presentation and disclosure of discontinued operations.

In particular, this Ind AS requires in respect of assets that meet the criteria to

be classified as held for sale:

(a) to be measured at the lower of carrying amount and fair value less

costs to sell, and depreciation on such assets to cease;

(b) to be presented separately in the balance sheet; and

(c) the results of discontinued operations to be presented separately in

the statement of profit and loss.

The Standard:

(a) adopts the classification ‘held for sale’;

(b) introduces the concept of a disposal group, being a group of assets to

be disposed of, by sale or otherwise, together as a group in a single

transaction, and liabilities directly associated with those assets that

will be transferred in the transaction;

(c) classifies an operation as discontinued at the date the operation meets

the criteria to be classified as held for sale or when the entity has

disposed of the operation.

An entity shall classify a non-current asset (or disposal group) {referred for

brevity as ‘Assets’} as held for sale if its carrying amount will be recovered

principally through a sale transaction rather than through continuing use.

Sale includes exchange of non-current assets when the exchange has

commercial substance in accordance with Ind AS 16.

For this to be the case, the Assets must be available for immediate sale in its

present condition subject only to terms that are usual and customary for

sales of such Assets and its sale must be highly probable. Thus, an Asset

cannot be classified as a non-current asset (or disposal group) held for sale,

if the entity intends to sell it in a distant future.

For the sale to be highly probable, the appropriate level of management must

be committed to a plan to sell the Asset, and an active program to locate a


25

buyer and complete the plan must have been initiated. Further, the Asset

must be actively marketed for sale at a price that is reasonable in relation to

its current fair value. In addition, the sale should be expected to qualify for

recognition as a completed sale within one year from the date of

classification and actions required to complete the plan should indicate that it

is unlikely that significant changes to the plan will be made or that the plan

will be withdrawn. Paragraph 9 read with Appendix B of the Standard

provides the criteria which are required to be met when the sale cannot be

concluded within 12 months.

The Standard also applies to Assets which are held for distribution to owners.

The conditions specified for sale as above also applies to distribution i.e.

distribution within twelve months including considering the requisite

permission for distribution, non-withdrawal of plan to distribute etc.

A discontinued operation is a component of an entity that either has been

disposed of or is classified as held for sale and:

(a) represents a separate major line of business or geographical area of

operations;

(b) is part of a single co-ordinated plan to dispose of a separate major line

of business or geographical area of operations; or

(c) is a subsidiary acquired exclusively with a view to resale.

A component of an entity comprises operations and cash flows that can be

clearly distinguished, operationally and for financial reporting purposes, from

the rest of the entity. In other words, a component of an entity will have been

a cash-generating unit or a group of cash-generating units while being held

for use.

An entity shall not classify as held for sale a non-current asset (or disposal

group) that is to be abandoned. The Standard specifies the treatment/

measurement in circumstances when there is a change in plan to sale Assets

which was previously classified as held for sale.

An entity shall present and disclose information that enables users of the

financial statements to evaluate the financial effects of discontinued

operations and disposals of non-current assets (or disposal groups).


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Ind AS 106, Exploration for and Evaluation of Mineral Resources The objective of this Standard is to specify the financial reporting for the

exploration for and evaluation of mineral resources.

Definitions

Exploration for and evaluation of mineral resources is the search for

mineral resources, including minerals, oil, natural gas and similar non-

regenerative resources after the entity has obtained legal rights to explore

in a specific area, as well as the determination of the technical feasibility

and commercial viability of extracting the mineral resource.

Exploration and evaluation expenditures are expenditures incurred by

an entity in connection with the exploration for and evaluation of mineral

resources before the technical feasibility and commercial viability of

extracting a mineral resource are demonstrable.

Exploration and evaluation assets are exploration and evaluation

expenditures recognised as assets in accordance with the entity’s

accounting policy.

Measurement

Exploration and evaluation assets at initial recognition shall be measured at

cost.

An entity shall determine an accounting policy specifying which expenditures

are recognised as exploration and evaluation assets and apply the policy

consistently.

After initial recognition, an entity shall apply either the cost model or the

revaluation model to the exploration and evaluation assets. The revaluation

model can be in accordance with AS 16 or Ind AS 38 but the same to be

consistent with the classification of the assets.

Expenditures related to the development of mineral resources shall not be

recognised as exploration and evaluation assets.

An entity should recognise any obligation for removal and restoration that are

incurred during a particular period as a consequence of having undertaken

the exploration for and evaluation of mineral resources.


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The Standard:

(a) permits an entity recognising exploration and evaluation assets to

apply paragraph 10 of Ind AS 8 to develop an accounting policy for

exploration and evaluation assets;

(b) requires entities recognising exploration and evaluation assets to

perform an impairment test on those assets when facts and

circumstances suggest that the carrying amount of the assets may

exceed their recoverable amount;

When facts and circumstances suggest that the carrying amount

exceeds the recoverable amount, an entity shall measure, present and

disclose any resulting impairment loss in accordance with Ind AS 36,

Impairment of Assets;

(c) varies the recognition of impairment from that in Ind AS 36 but

measures the impairment in accordance with that Standard once the

impairment is identified.

Impairment

When facts and circumstances suggest that the carrying amount exceeds the

recoverable amount, an entity shall measure, present and disclose any

resulting impairment loss.

One or more of the following facts and circumstances indicate that an entity

should test exploration and evaluation assets for impairment (the list is not

exhaustive):

(a) the period for which the entity has the right to explore in the specific

area has expired during the period or will expire in the near future, and

is not expected to be renewed.

(b) substantive expenditure on further exploration for and evaluation of

mineral resources in the specific area is neither budgeted nor planned.

(c) exploration for and evaluation of mineral resources in the specific area

have not led to the discovery of commercially viable quantities of

mineral resources and the entity has decided to discontinue such

activities in the specific area.

(d) sufficient data exist to indicate that, although a development in the

specific area is likely to proceed, the carrying amount of the


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exploration and evaluation asset is unlikely to be recovered in full from

successful development or by sale.

An entity shall determine an accounting policy for allocating exploration and

evaluation assets to cash-generating units or groups of cash-generating units

for the purpose of assessing such assets for impairment. Each cash-

generating unit or group of units to which an exploration and evaluation asset

is allocated shall not be larger than an operating segment determined in

accordance with Ind AS 108, Operating Segments.

Disclosure

An entity shall disclose information that identifies and explains the amounts

recognised in its financial statements arising from the exploration for and

evaluation of mineral resources. An entity shall treat exploration and

evaluation assets as a separate class of assets and make the disclosures

required by either Ind AS 16 or Ind AS 38 consistent with how the assets are

classified.


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Ind AS 107, Financial Instruments: Disclosures The objective of the Ind AS 107 is to require entities to provide disclosures in their financial statements that enable users to evaluate:

(a) the significance of financial instruments for the entity’s financial position and performance; and

(b) the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the end of the reporting period, and how the entity manages those risks.

The qualitative disclosures describe management’s objectives, policies and processes for managing those risks. The quantitative disclosures provide information about the extent to which the entity is exposed to risk, based on information provided internally to the entity’s key management personnel. Together, these disclosures provide an overview of the entity’s use of financial instruments and the exposures to risks they create.

The Ind AS applies to all entities, including entities that have few financial instruments (e.g., a manufacturer whose only financial instruments are accounts receivable and accounts payable) and those that have many financial instruments (e.g., a financial institution most of whose assets and liabilities are financial instruments).

When this Ind AS requires disclosures by class of financial instrument, an entity shall group financial instruments into classes that are appropriate to the nature of the information disclosed and that take into account the characteristics of those financial instruments. An entity shall provide sufficient information to permit reconciliation to the line items presented in the statement of financial position.

The principles in this Ind AS complement the principles for recognising, measuring and presenting financial assets and financial liabilities in Ind AS 32, Financial Instruments: Presentation and Ind AS 109, Financial Instruments.

Disclosures in Balance Sheet

An entity shall disclose information that enables users of its financial

statements to evaluate the significance of financial instruments for its

financial position and performance.


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The carrying amounts of each of the following, shall be disclosed either in the

balance sheet or in the notes:

(a) financial assets measured at fair value through profit or loss’

(b) financial liabilities at fair value through profit or loss’

(c) financial assets measured at amortised cost’

(d) financial liabilities measured at amortised cost’

(e) financial assets measured at fair value through other comprehensive

income.

If in the current or previous reporting periods an entity reclassifies any

financial asset, then it shall disclose:

(a) the date of reclassification,

(b) a detailed explanation of the change in business model and a

qualitative description of its effect on the entity’s financial statements,

and

(c) the amount reclassified into and out of each category.

Collateral

An entity shall disclose:

(a) the carrying amount of financial assets it has pledged as collateral for

liabilities or contingent liabilities; and

(b) the terms and conditions relating to its pledge.

When an entity holds collateral (of financial or non-financial assets) and is

permitted to sell or repledge the collateral in the absence of default by the

owner of the collateral, it shall disclose:

(a) the fair value of the collateral held;

(b) the fair value of any such collateral sold or repledged, and whether the

entity has an obligation to return it; and

(c) the terms and conditions associated with its use of the collateral.

Defaults

For loans payable recognised at the end of the reporting period, an entity

shall disclose:


31

(a) details of any defaults during the period of principal, interest, sinking

fund, or redemption terms of those loans payable;

(b) the carrying amount of the loans payable in default at the end of the

reporting period; and

(c) whether the default was remedied, or the terms of the loans payable

were renegotiated, before the financial statements were approved for

issue.

Disclosures in Statement of profit and loss

An entity shall disclose the following items of income, expense, gains or

losses either in the statement of profit and loss or in the notes:

(a) net gains or net losses on:

(i) financial assets or financial liabilities measured at fair value

through profit or loss.

(ii) financial liabilities measured at amortised cost.

(iii) financial assets measured at amortised cost.

(iv) investments in equity instruments designated at fair value

through other comprehensive income.

(v) financial assets measured at fair value through other

comprehensive income.

(b) total interest revenue and total interest expense (calculated using the

effective interest method) for financial assets that are measured at

amortised cost or that are measured at fair value through other

comprehensive income (showing these amounts separately); or

financial liabilities that are not measured at fair value through profit or

loss.

(c) fee income and expense (other than amounts included in determining

the effective interest rate) arising from:

(i) financial assets and financial liabilities that are not at fair value

through profit or loss; and

(ii) trust and other fiduciary activities that result in the holding or

investing of assets on behalf of individuals, trusts, retirement

benefit plans, and other institutions.


32

An entity shall disclose an analysis of the gain or loss recognised in the

statement of profit and loss arising from the derecognition of financial assets

measured at amortised cost, showing separately gains and losses arising

from derecognition of those financial assets. This disclosure shall include the

reasons for derecognising those financial assets.

Other disclosures

Hedge accounting

An entity following hedge accounting shall provide information about:

(a) an entity’s risk management strategy and how it is applied to manage

risk;

(b) how the entity’s hedging activities may affect the amount, timing and

uncertainty of its future cash flows; and

(c) the effect that hedge accounting has had on the entity’s balance sheet,

statement of profit and loss and statement of changes in equity.

Fair Value

An entity shall disclose the fair value of that class of assets and liabilities in a

way that permits it to be compared with its carrying amount for each class of

financial assets and financial liabilities.

Nature and extent of risks arising from financial instruments


statements to evaluate the nature and extent of risks arising from financial

instruments to which the entity is exposed at the end of the reporting period.

Qualitative disclosures

For each type of risk arising from financial instruments, an entity shall

disclose:

(a) the exposures to risk and how they arise;

(b) its objectives, policies and processes for managing the risk and the

methods used to measure the risk; and

(c) any changes in the above from the previous period.


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Quantitative disclosures

For each type of risk arising from financial instruments, an entity shall

disclose:

(a) summary quantitative data about its exposure to that risk at the end of

the reporting period.

(b) the disclosures required by paragraphs 36–42 of this standard, to the

extent not provided in accordance with (a).

(c) concentrations of risk if not apparent from the disclosures made in

accordance with (a) and (b).

Credit risk disclosures:

(a) information about an entity’s credit risk management practices and

how they relate to the recognition and measurement of expected credit

losses, including the methods, assumptions and information used to

measure expected credit losses;

(b) quantitative and qualitative information that allows users of financial

statements to evaluate the amounts in the financial statements arising

from expected credit losses, including changes in the amount of

expected credit losses and the reasons for those changes; and

(c) information about an entity’s credit risk exposure (ie the credit risk

inherent in an entity’s financial assets and commitments to extend

credit) including significant credit risk concentrations.

Liquidity risk disclosures:

(a) a maturity analysis for non-derivative financial liabilities (including

issued financial guarantee contracts) that shows the remaining

contractual maturities.

(b) a maturity analysis for derivative financial liabilities. The maturity

analysis shall include the remaining contractual maturities for those

derivative financial liabilities for which contractual maturities are

essential for an understanding of the timing of the cash flows (see

paragraph B11B).

(c) a description of how it manages the liquidity risk inherent in (a) and

(b).


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Market risk disclosures:

(a) a sensitivity analysis for each type of market risk to which the entity is

exposed at the end of the reporting period, showing how profit or loss

and equity would have been affected by changes in the relevant risk

variable that were reasonably possible at that date;

(b) the methods and assumptions used in preparing the sensitivity

analysis; and

(c) changes from the previous period in the methods and assumptions

used, and the reasons for such changes.


35

Ind AS 108, Operating Segments An entity shall disclose information to enable users of its financial statements

to evaluate the nature and financial effects of the business activities in which

it engages and the economic environments in which it operates.

The Standard requires an entity to report financial and descriptive

information about its reportable segments. Reportable segments are

operating segments or aggregations of operating segments that meet

specified criteria. Operating segments are components of an entity that

engages in business activities, whose operating results are regularly

reviewed by the chief operating decision maker (CODM) for allocation of

resources and assessment of performance and for which discrete financial

information is available. Generally, financial information is required to be

reported on the same basis as is used internally for evaluating operating

segment performance and deciding how to allocate resources to operating

segments. The start-up operations which is yet to earn revenues may also be

a operating segment.

If the entity chooses to disclose information in regard to segments which do

not meet with the defination of this Standard, the entity shall not describe

such information as segment information.

If a financial report contains both the consolidated financial statements of a

parent that is within the scope of this Standard as well as the parent’s

separate financial statements, segment information is required only in the

consolidated financial statements.

The Standard requires an entity to report a measure of profit or loss

operating segment. It also requires an entity to report a measure of total

assets, liabilities and particular income and expense items if such amounts

are regularly provided to the CODM. It requires reconciliations of totals of

segment revenues, reported segment profit or loss, segment assets,

segment liabilities and other material segment items to corresponding

amounts in the entity’s financial statements.

CODM identifies a function i.e. allocating resources to and assessing the

performance of the operating segments of an entity & not necessarily a

manager with a specific title. Often the CODM of an entity is its chief

executive officer or chief operating officer but, for example, it may also be a

group of executive directors or others.


36

The Standard requires an entity to report information about the revenues

derived from its products or services (or groups of similar products and

services), about the countries in which it earns revenues and holds assets,

and about major customers, regardless of whether that information is used

by management in making operating decisions. However, the Standard does

not require an entity to report information that is not prepared for internal use

if the necessary information is not available and the cost to develop it would

be excessive.

The Standard also requires an entity to give descriptive information about the

way in which operating segments were determined, the products and

services provided by such segments, differences between the measurements

used in reportable segment information and those used in the entity’s

financial statements, and changes in the measurement of segment amounts

from period to period.


37

Ind AS 109, Financial Instruments The objective of Ind AS 109 is to establish principles for the financial

reporting of financial assets and financial liabilities that will present relevant

and useful information to users of financial statements for their assessment

of the amounts, timing and uncertainty of an entity’s future cash flows.

Scope

This Standard should be applied by all entities to all types of financial

instruments except:

(a) interests in subsidiaries, associates and joint ventures other than

those that are accounted for as per this standard in accordance with

the permission given by Ind AS 110, Ind AS 27 or Ind AS 28.

(b) rights and obligations under leases to which Ind AS 116 Leases

applies. However, lease receivables are subject to the derecognition

and impairment requirements of Ind AS 109, lease liabilities are

subject to the derecognition requirements of Ind AS 109 and

derivatives that are embedded in leases are subject to the embedded derivatives requirements of Ind AS 109.

(c) employers’ rights and obligations under employee benefit plans, to

which Ind AS 19, Employee Benefits applies.

(d) financial instruments issued by the entity that meet the definition of an

equity instrument.

(e) rights and obligations arising under (i) an insurance contract or (ii) a

contract that is within the scope of Ind AS 104 contains a discretionary

participation feature.

(f) any forward contract to buy or sell an acquiree that will result in a

business combination within the scope of Ind AS 103.

(g) loan commitments other than those which entity designates as

financial liabilities at fair value through profit or loss, loan commitments

that can be settled net in cash or by delivering or issuing another

financial instrument and commitments to provide a loan at a below-

market interest rate.

(h) financial instruments, contracts and obligations under share-based

payment transactions to which Ind AS 102, Share-based Payment


38

applies except contract to buy/sell non-financial assets which are

within the scope of this standard.

(i) rights to payments to reimburse the entity for expenditure that it is

required to make to settle a liability that it recognises as a provision in

accordance with Ind AS 37.

(j) rights and obligations within the scope of Ind AS 115, Revenue from

Contracts with Customers, that are financial instruments, except for

those that Ind AS 115 specifies are accounted for in accordance with

this Standard.

(k) Contracts to buy or sell a non-financial item which cannot be settled

net in cash or another financial instrument, or by exchanging financial

instruments.

Recognition

An entity shall recognise a financial asset or a financial liability in its balance

sheet when, and only when, the entity becomes party to the contractual

provisions of the instrument.

Derecognition: Financial Assets

A financial asset shall be derecognised when and only when:

(a) the contractual rights to the cash flows from the financial asset expire,

or

(b) it transfers the financial asset and the transfer qualifies for

derecognition.

On derecognition of a financial asset in its entirety, the difference between

the carrying amount (measured at the date of derecognition) and the

consideration received (including any new asset obtained less any new

liability assumed) shall be recognised in profit or loss.

In case of partial derecognition of a financial asset, the previous carrying

amount of the whole asset shall be allocated between the part that continues

to be recognised and the part that is derecognised, on the basis of the

relative fair values of those parts on the date of the transfer.

Derecognition: Financial Liabilities

A financial liability (or a part of a financial liability) shall be derecognised


39

when, and only when, it is extinguished (obligation specified in the contract is

discharged or cancelled or expires).

An entity shall account for a substantial modification of the terms of contracts

as an extinguishment of the original financial liability and the recognition of a

new financial liability. Any difference between the carrying amount of a

financial liability extinguished or transferred and the consideration paid

should be recognised in profit or loss.

Classification: Financial Assets

A financial asset shall be classified and measured at amortised cost, fair

value through other comprehensive income or fair value through profit or loss

on the basis of both:

(a) the entity’s business model for managing the financial assets and

(b) the contractual cash flow characteristics of the financial asset.

A financial asset shall be measured at amortised cost if both of the following

conditions are met:

(a) business model objective is to hold financial assets in order to collect

contractual cash flows and

(b) the contractual terms of the financial asset give rise on specified dates

to cash flows that are solely payments of principal and interest on the

principal amount outstanding.

A financial asset shall be measured at fair value through other

comprehensive income (FVTOCI) if both of the following conditions are met:

(a) business model objective is achieved by both collecting contractual

cash flows and selling financial assets and

(b) the contractual terms of the financial asset give rise on specified dates

to cash flows that are solely payments of principal and interest on the

principal amount outstanding.

Financial assets other than those measured at FVTOCI and at amortised

cost shall be measured at fair value through profit or loss (FVTPL). However,

an entity may, at initial recognition, irrevocably designate a financial asset as

measured at FVTPL, if doing so eliminates or significantly reduces

‘accounting mismatch’. An entity may also make an irrevocable election at

initial recognition for particular investments in equity instruments that would


40

otherwise be measured at fair value through profit or loss to present

subsequent changes in fair value in other comprehensive income.

Classification: Financial Liabilities

An entity shall classify all financial liabilities as subsequently measured at

amortised cost, except for:

(a) financial liabilities at fair value through profit or loss.

(b) financial liabilities that arise when a transfer of a financial asset does

not qualify for derecognition or when the continuing involvement

approach applies.

(c) financial guarantee contracts.

(d) commitments to provide a loan at a below-market interest rate.

(e) contingent consideration recognised by an acquirer in a business

combination to which Ind AS 103 applies.

An entity may, at initial recognition, irrevocably designate a financial liability

as measured at fair value through profit or loss.

Embedded derivatives

An embedded derivative is a component of a hybrid contract that also

includes a non-derivative host with the effect that some of the cash flows of

the combined instrument vary in a way similar to a stand-alone derivative.

Reclassification

When, and only when, an entity changes its business model for managing

financial assets, it shall reclassify all affected financial assets.

Measurement

At initial recognition, an entity shall measure a financial asset or financial

liability at its fair value plus or minus, in the case of a financial asset or

financial liability not at fair value through profit or loss, transaction costs that

are directly attributable to the acquisition or issue of the financial asset or

financial liability.

After initial recognition, an entity shall measure a financial asset and financial

liabilities in accordance with its classification.


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An entity shall recognise a loss allowance for expected credit losses on a

financial asset that is measured at FVTOCI and at amortised cost, a lease

receivable, a loan commitment and a financial guarantee contract to which

the impairment requirements of this standard applies.

An entity shall measure expected credit losses of a financial instrument in a

way that reflects an unbiased and probability-weighted amount that is

determined by evaluating a range of possible outcomes; the time value of

money; and reasonable and supportable information that is available without

undue cost or effort at the reporting date about past events, current

conditions and forecasts of future economic conditions.

A gain or loss on a financial asset or financial liability that is measured at fair

value shall be recognised in profit or loss unless it is part of a hedging

relationship or it is an investment in an equity instrument for which option to

present gains and losses in other comprehensive income has been opted or

it is a financial liability designated as at fair value through profit or loss or it is

a financial asset measured at fair value through other comprehensive

income.

Hedge accounting

The objective of hedge accounting is to represent, in the financial

statements, the effect of an entity’s risk management activities that use

financial instruments to manage exposures arising from particular risks that

could affect profit or loss (or other comprehensive income, in the case of

investments in equity instruments for which an entity has elected to present

changes in fair value in other comprehensive income).

(a) Hedging instruments: A derivative measured at fair value through

profit or loss may be designated as a hedging instrument.

A non-derivative financial asset or a non-derivative financial liability

measured at fair value through profit or loss may be designated as a

hedging instrument unless it is a financial liability designated as at fair

value through profit or loss for which the amount of its change in fair

value that is attributable to changes in the credit risk of that liability is

presented in other comprehensive income.

Only contracts entered into by the entity with party external to the

reporting entity can be designated as hedging instruments.


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(b) Hedged items: A hedged item can be a recognised asset or liability,

an unrecognised firm commitment, a forecast transaction or a net

investment in a foreign operation. The hedged item can be a single

item or a group of items. A hedge item should be reliably measurable.

Types of Hedging Relationship- There are three types of hedging

relationships:

(a) fair value hedge: a hedge of the exposure to changes in fair value of

a recognised asset or liability or an unrecognised firm commitment, or

a component of any such item, that is attributable to a particular risk

and could affect profit or loss.

(b) cash flow hedge: a hedge of the exposure to variability in cash flows

that is attributable to a particular risk associated with all, or a

component of, a recognised asset or liability or a highly probable

forecast transaction, and could affect profit or loss.

(c) hedge of a net investment in a foreign operation as defined in Ind

AS 21.

Qualifying criteria for hedge accounting

A hedging relationship qualifies for hedge accounting, only if, all of the

following criteria are met:

(a) the hedging relationship consists only of eligible hedging instruments

and eligible hedged items.

(b) at the inception of the hedging relationship there is formal designation

and documentation of the hedging relationship and the entity’s risk

management objective and strategy for undertaking the hedge.

(c) the hedging relationship meets all of the following hedge effectiveness

requirements:

(i) there is an economic relationship between the hedged item and

the hedging instrument;

(ii) the effect of credit risk does not dominate the value changes

that result from that economic relationship; and

(iii) the hedge ratio of the hedging relationship is the same as that

resulting from the quantity of the hedged item that the entity

actually hedges and the quantity of the hedging instrument that

the entity actually uses to hedge that quantity of hedged item.


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In case a hedging relationship ceases to meet the hedge effectiveness

requirement relating to the hedge ratio but the risk management objective for

that designated hedging relationship remains the same, an entity shall adjust

the hedge ratio of the hedging relationship so that it meets the qualifying

criteria again called as ‘rebalancing’.

An entity shall discontinue hedge accounting prospectively only when the

hedging relationship (or a part of a hedging relationship) ceases to meet the

qualifying criteria (after taking into account any rebalancing of the hedging

relationship, if applicable).

Ind AS 109 prescribes principles for hedge accounting and also requires

detailed disclosures. These disclosures explain both the effect that hedge

accounting has had on the financial statements and an entity’s risk

management strategy, as well as providing details about derivatives that

have been entered into and their effect on the entity’s future cash flows.


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Ind AS 110, Consolidated Financial Statements The objective of this Indian Accounting Standard (Ind AS) is to establish

principles for the presentation and preparation of consolidated financial

statements when an entity controls one or more other entities.

Consolidated financial statements are the financial statements of a group

in which the assets, liabilities, equity, income, expenses and cash flows of

the parent and its subsidiaries are presented as those of a single economic

entity.

The Standard requires an entity that is a parent to present Consolidated

Financial Statements (CFS). A limited exemption is available to some

entities. The Standard defines the principle of control and establishes control

as the basis for determining which entities are consolidated in the

consolidated financial statements.

An investor controls an investee when the investor is exposed, or has rights,

to variable returns from its involvement with the investee and has the ability

to affect those returns through its power over the investee.

Single control model

An investor controls an investee if and only if the investor has all the

following:

(i) Power over an investee - when the investor has existing rights that give it

the current ability to direct the relevant activities, i.e. the activities that

significantly affect the investee’s returns. (also see below)

(ii) Exposure, or rights, to variable returns from its involvement with the

investee - An investor is exposed, or has rights, to variable returns from its

involvement with the investee when the investor’s returns from its

involvement have the potential to vary as a result of the investee’s

performance. The investor’s returns can be only positive, only negative or

both positive and negative. Returns are broadly defined and include not only

direct returns but also indirect returns.

(iii) The ability to use power over the investee to affect the amount of

the investor’s returns - An investor controls an investee if the investor not


45

only has power over the investee and exposure or rights to variable returns

from its involvement with the investee, but also has the ability to use its

power to affect the investor’s returns from its involvement with the investee.

Thus, an investor with decision-making rights shall determine whether it is a

principal or an agent.

Power arises from rights. Sometimes assessing power is straightforward,

such as when power over an investee is obtained directly and solely from the

voting rights granted by equity instruments such as shares, and can be

assessed by considering the voting rights from those shareholdings. In such

cases, the investor considers potential voting rights that are substantive,

rights arising from other contractual arrangements and factors that may

indicate de facto power. In other cases i.e. where voting rights are not

relevant for assessing power (for example when power results from one or

more contractual arrangements), the assessment will be more complex and

require more than one factor to be considered such as evidence of the

practical ability to direct the relevant activities (the most important factor),

indications of a special relationship with the investee, and the size of the

investor’s exposure to variable returns from its involvement with the investee.

To have power over an investee, an investor must have existing rights that

give it the current ability to direct the ‘relevant activities’ ie the activities that

significantly affect the investee’s returns. For the purpose of assessing

power, only substantive rights and rights that are not protective shall be

considered.

Control is assessed on a continuous basis.

An ‘investment entity’ shall not consolidate its subsidiaries (or apply Ind AS

103) when it obtains control of another entity. Instead, an investment entity

shall measure an investment in a subsidiary at fair value through profit or

loss in accordance with Ind AS 109. A parent of an investment entity shall

consolidate all entities that it controls, including those controlled through an

investment entity subsidiary, unless the parent itself is an investment entity.

Accounting requirements

Consolidated financial statements:

(a) combine like items of assets, liabilities, equity, income, expenses and

cash flows of the parent with those of its subsidiaries.


46

(b) offset (eliminate) the carrying amount of the parent’s investment in

each subsidiary and the parent’s portion of equity of each subsidiary

(Ind AS 103 explains how to account for any related goodwill).

(c) eliminate in full intragroup assets and liabilities, equity, income,

expenses and cash flows relating to transactions between entities of

the group (profits or losses resulting from intragroup transactions that

are recognised in assets, such as inventory and fixed assets, are

eliminated in full).

A parent shall prepare consolidated financial statements using uniform

accounting policies for like transactions and other events in similar

circumstances.

The difference between the reporting date of a parent and its subsidiary

should not be more than three months. Adjustments are made for the effects

of significant transactions and events between the two dates.

Consolidation of an investee shall begin from the date the investor obtains

control of the investee and cease when the investor loses control of the

investee.

Non-controlling interest (NCI)

Non-controlling interest is the equity in a subsidiary not attributable,

directly or indirectly, to a parent.

To the extent NCI relates to present ownership interests that entitle their

holders to a proportionate share of the entity's net assets in liquidation, these

are measured at fair value or at their proportionate interest in the net assets

of the acquiree, at the date of acquisition. All other NCI are generally

measured at fair value.

A parent shall present non-controlling interests in the consolidated balance

sheet within equity, separately from the equity of the owners of the parent.

Changes in a parent’s ownership interest in a subsidiary that do not result in

the parent losing control of the subsidiary are equity transactions (ie

transactions with owners in their capacity as owners).

Loss of control

If a parent loses control of a subsidiary, the parent should:


47

(a) derecognise the assets and liabilities of the former subsidiary from the

consolidated balance sheet.

(b) recognise any investment retained in the former subsidiary at its fair

value when control is lost and subsequently account for it and for any

amounts owed by or to the former subsidiary in accordance with

relevant Ind ASs. That fair value shall be regarded as the fair value on

initial recognition of a financial asset in accordance with Ind AS 109 or,

when appropriate, the cost on initial recognition of an investment in an

associate or joint venture.

(c) recognise the gain or loss associated with the loss of control

attributable to the former controlling interest.


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Ind AS 111, Joint Arrangements The objective of this Indian Accounting Standard (Ind AS) is to establish

principles for financial reporting by entities that have an interest in

arrangements that are controlled jointly (ie joint arrangements). The Standard

requires a party to a joint arrangement to determine the type of joint

arrangement in which it is involved by assessing its rights and obligations

arising from the arrangement.

The Standard shall be applied by all entities that are a party to a joint

arrangement. A joint arrangement is an arrangement of which two or more

parties have joint control. Joint control is the contractually agreed sharing of

control of an arrangement, which exists only when decisions about the

relevant activities require the unanimous consent of the parties sharing

control.

The Standard classifies joint arrangements into two types—joint operations

and joint ventures. The classification of a joint arrangement as a joint

operation or a joint venture depends upon the rights and obligations of the

parties to the arrangement. A joint operation is a joint arrangement whereby

the parties that have joint control of the arrangement have rights to the

assets, and obligations for the liabilities, relating to the arrangement. Those

parties are called joint operators. A joint venture is a joint arrangement

whereby the parties that have joint control of the arrangement have rights to

the net assets of the arrangement. Those parties are called joint venturers.

An entity determines the type of joint arrangement in which it is involved by

considering its rights and obligations. An entity assesses its rights and

obligations by considering the structure and legal form of the arrangement,

the contractual terms agreed to by the parties to the arrangement and, when

relevant, other facts and circumstances.

The Standard requires a joint operator to account for the assets (including its

share of any assets held jointly), liabilities (including its share of any

liabilities incurred jointly), its revenue from the sale of its share of the output

arising from the joint operation, its share of the revenue from the sale of the

output by the joint operation; its expenses (including its share of any

expenses incurred jointly) relating to its interest in a joint operation in

accordance with the Ind AS applicable to the particular assets, liabilities,

revenues and expenses.


49

The Standard requires a joint venturer to recognise its interest in a joint

venture as an investment and to account for that investment using the equity

method in accordance with Ind AS 28, Investments in Associates and Joint

Ventures, unless the entity is exempted from applying the equity method as

specified in that standard.


50

Ind AS 112, Disclosure of Interests in Other Entities The objective of this Standard is to require an entity to disclose information

that enables users of its financial statements to evaluate:

(a) the nature of, and risks associated with, its interests in other entities;

and

(b) the effects of those interests on its financial position, financial


The Standard shall be applied by an entity that has an interest in a

subsidiary, a joint arrangement (i.e. joint operation or joint venture), an

associate or an unconsolidated structured entity.

Significant judgements and assumptions

An entity shall disclose information about significant judgements and

assumptions it has made (and changes to those judgements and

assumptions) in determining:

(a) that it has control of another entity, ie an investee;

(b) that it has joint control of an arrangement or significant influence over

another entity; and

(c) the type of joint arrangement (ie joint operation or joint venture) when

the arrangement has been structured through a separate vehicle.

Investment entity status

When a parent determines that it is an investment entity in accordance with

Ind AS 110, the investment entity shall disclose information about significant

judgements and assumptions it has made in determining that it is an

investment entity. If the investment entity does not have one or more of the

typical characteristics of an investment entity, it shall disclose its reasons for

concluding that it is nevertheless an investment entity.

When an entity becomes, or ceases to be, an investment entity, it shall

disclose the change of status and the reasons for the change. In addition, an

entity that becomes an investment entity shall disclose the effect of the


51

change of status on the financial statements for the period presented,

including:

(a) the total fair value, as of the date of change of status, of the

subsidiaries that cease to be consolidated;

(b) the total gain or loss, if any; and

(c) the line item(s) in profit or loss in which the gain or loss is recognised

(if not presented separately).

Insterests in subsidiaries

An entity shall disclose information that enables users of its consolidated

financial statements

(a) to understand:

(i) the composition of the group; and

(ii) the interest that non-controlling interests have in the group’s

activities and cash flows; and

(b) to evaluate:

(i) the nature and extent of significant restrictions on its ability to

access or use assets, and settle liabilities, of the group;

(ii) the nature of, and changes in, the risks associated with its

interests in consolidated structured entities;

(iii) the consequences of changes in its ownership interest in a

subsidiary that do not result in a loss of control; and

(iv) the consequences of losing control of a subsidiary during the

reporting period.

An entity shall also disclose for each of its subsidiaries that have non-

controlling interests (NCI) that are material to the reporting entity information

required by the Standard. The information includes the proportion of voting

rights held by NCI, if different from the proportion of ownership interests held,

the profit or loss allocated to NCI of the subsidiary during the reporting

period, accumulated NCI of the subsidiary at the end of the reporting period,

summarised financial information about the subsidiary etc.


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Interest in unconsolidated subsidiaries

An investment entity shall disclose:

(a) the name of each unconsolidated subsidiary;

(b) the principal place of business (and country of incorporation if different

from the principal place of business) of each unconsolidated

subsidiary; and

(c) the proportion of ownership interest held by the investment entity and,

if different, the proportion of voting rights held in each unconsolidated

subsidiary.

(d) the nature and extent of any significant restrictions on the ability of the

unconsolidated subsidiary to transfer funds to the investment entity in

the form of cash dividends or to repay loans or advances made to the

unconsolidated subsidiary by the investment entity; and

(e) any current commitments or intentions to provide financial or other

support to an unconsolidated subsidiary, including commitments or

intentions to assist the subsidiary in obtaining financial support.

Interests in joint arrangements and associates


statements to evaluate:

(a) the nature, extent and financial effects of its interests in joint

arrangements and associates, including the nature and effects of its

contractual relationship with the other investors with joint control of, or

significant influence over, joint arrangements and associates; and

(b) the nature of, and changes in, the risks associated with its interests in

joint ventures and associates.

Interests in unconsolidated structure entities


statements:

(a) to understand the nature and extent of its interests in unconsolidated

structured entities; and

(b) to evaluate the nature of, and changes in, the risks associated with its

interests in unconsolidated structured entities.


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Ind AS 113, Fair Value Measurement Ind AS 113 applies when another Ind AS requires or permits fair value

measurements or disclosures about fair value measurements (and

measurements, such as fair value less costs to sell, based on fair value or

disclosures about those measurements), except in specified circumstances.

The measurement and disclosure requirements of this Ind AS do not apply to

the following:

(a) share-based payment transactions within the scope of Ind AS 102,

Share- based Payment;

(b) leasing transactions within the scope of Ind AS 116, Leases; and

(c) measurements that have some similarities to fair value but are not fair

value, such as net realisable value in Ind AS 2, Inventories, or value in

use in Ind AS 36, Impairment of Assets.

The disclosures required by this Ind AS are not required for the following:

(a) plan assets measured at fair value in accordance with Ind AS 19,

Employee Benefits; and

(b) assets for which recoverable amount is fair value less costs of

disposal in accordance with Ind AS 36.

The Standard defines fair value as the price that would be received to sell

an asset or paid to transfer a liability in an orderly transaction between

market participants at the measurement date.

Asset or liability

A fair value measurement is for a particular asset or liability. Therefore, when

measuring fair value an entity shall take into account the characteristics of

the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

Such characteristics include, the condition and location of the asset; and

restrictions, if any, on the sale or use of the asset.

The transaction

A fair value measurement assumes that the asset or liability is exchanged in

an orderly transaction between market participants to sell the asset or

transfer the liability at the measurement date under current market


54

conditions. A fair value measurement assumes that the transaction to sell the

asset or transfer the liability takes place either, in the principal market for the

asset or liability or in the absence of a principal market, in the most

advantageous market for the asset or liability.

Market participants

An entity shall measure the fair value of an asset or a liability using the

assumptions that market participants would use when pricing the asset or

liability, assuming that market participants act in their best economic interest.

The price

Fair value is the price that would be received to sell an asset or paid to

transfer a liability in an orderly transaction in the principal (or most

advantageous) market at the measurement date under current market

conditions (i.e., an exit price) regardless of whether that price is directly

observable or estimated using another valuation technique.

Application to non-financial assets

A fair value measurement of a non-financial asset takes into account a

market participant's ability to generate economic benefits by using the asset

in its highest and best use or by selling it to another market participant that

would use the asset in its highest and best use. The highest and best use of

a non-financial asset takes into account the use of the asset that is physically

possible, legally permissible and financially feasible.

Valuation techniques

Valuation techniques used to measure fair value shall maximise the use of

relevant observable inputs and minimise the use of unobservable inputs.

Three widely used valuation techniques are the market approach, the cost

approach and the income approach.

Market approach is a valuation technique that uses prices and other

relevant information generated by market transactions involving identical or

comparable (ie similar) assets, liabilities or a group of assets and liabilities,

such as a business.

Cost approach is a valuation technique that reflects the amount that would

be required currently to replace the service capacity of an asset (often

referred to as current replacement cost).


55

Income approach is a valuation techniques that converts future amounts (eg

cash flows or income and expenses) to a single current (ie discounted)

amount. The fair value measurement is determined on the basis of the value

indicated by current market expectations about those future amounts.

Valuation techniques used to measure fair value shall maximise the use of

relevant observable inputs and minimise the use of unobservable inputs.

To increase consistency and comparability in fair value measurements and

related disclosures, this Ind AS establishes a fair value hierarchy that

categorises into three levels, the inputs to valuation techniques used to

measure fair value. The fair value hierarchy gives the highest priority to

quoted prices (unadjusted) in active markets for identical assets or liabilities

(Level 1 inputs) and the lowest priority to unobservable inputs (Level 3

inputs).

Level 1 inputs are quoted prices (unadjusted) in active markets for identical

assets or liabilities that the entity can access at the measurement date.

Level 2 inputs are inputs other than quoted prices included within Level 1

that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for the asset or liability.

Disclosure

An entity shall disclose information that helps users of its financial

statements assess both of the following:

(a) for assets and liabilities that are measured at fair value on a recurring

or non-recurring basis in the balance sheet after initial recognition, the

valuation techniques and inputs used to develop those measurements.

(b) for recurring fair value measurements using significant unobservable

inputs (Level 3), the effect of the measurements on profit or loss or

other comprehensive income for the period.


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Ind AS 114, Regulatory Deferral Accounts The objective of this Standard is to specify the financial reporting

requirements for regulatory deferral account balances that arise when an

entity provides goods or services to customers at a price or rate that is

subject to rate regulation.

Rate-regulated activities are an entity’s activities that are subject to rate regulation.

A regulator is an authorised body empowered by statute or by any

government or any authorised agency of a government to set rates that binds

an entity’s customers.

Rate regulation is a form of regulation for setting an entity’s prices (rates) in

which there is a cause-and-effect relationship between the entity’s specific

costs and its revenues.

Regulatory deferral account balance is a ‘Regulatory Asset’ or a

‘Regulatory Liability’.

A regulatory asset is an entity’s right to recover fixed or determinable

amounts of money towards incurred costs as a result of the actual or

expected actions of its regulator under the applicable regulatory framework.

A regulatory liability is an entity’s obligation to refund or adjust fixed or

determinable amounts of money as a result of actual or expected action of its

regulator under the applicable regulatory framework.

An entity is permitted to apply the requirements of this Standard in its first Ind

AS financial statements, if and only if, it:

(a) conducts rate-regulated activities; and

(b) recognised amounts that qualify as regulatory deferral account

balances in its financial statements in accordance with its previous

GAAP.

An entity shall apply the requirements of the Standard in its financial

statements for subsequent periods, if and only if, in its first Ind AS financial

statements, it recognised regulatory deferral account balances by electing to

apply the requirements of this Standard.

An entity that is within the scope of, and that elects to apply, this Standard

shall apply all of its requirements to all regulatory deferral account balances

that arise from all of the entity’s rate-regulated activities.


57

An entity that has rate-regulated activities and that is within the scope of, and

elects to apply, this Standard shall apply paragraphs 10 and 12 of Ind AS 8

when developing its accounting policies for the recognition, measurement,

impairment and derecognition of regulatory deferral account balances.

Recognition, measurement, impairment and derecognition

On initial application, an entity shall continue to apply previous GAAP

accounting policies for the recognition, measurement, impairment and

derecognition of regulatory deferral account balances except for the changes

as permitted by the Standard.

An entity shall not change its accounting policies in order to start to

recognise regulatory deferral account balances.

An entity may only change its accounting policies for the recognition,

measurement, impairment and derecognition of regulatory deferral account

balances if the change makes the financial statements more relevant to the

economic decisionmaking needs of users and no less reliable, or more

reliable and no less relevant to those needs.

Any specific exception, exemption or additional requirements related to the

interaction of the Standard with other Standards are contained within the

Standard. In the absence of any such exception, exemption or additional

requirements, other Standards shall apply to regulatory deferral account

balances in the same way as they apply to assets, liabilities, income and

expenses that are recognised in accordance with other Standards.

Classification of regulatory defferal account balances

An entity shall present separate line items in the balance sheet for:

(a) the total of all regulatory deferral account debit balances; and

(b) the total of all regulatory deferral account credit balances.

Classification of movements in regulatory deferral account balances

An entity shall present, in the other comprehensive income section of the

statement of profit and loss, the net movement in all regulatory deferral

account balances for the reporting period that relate to items recognised in


58

other comprehensive income. Separate line items shall be used for the net

movement related to items that, in accordance with other Standards:

(a) will not be reclassified subsequently to profit or loss; and

(b) will be reclassified subsequently to profit or loss when specific

conditions are met.

An entity shall present a separate line item in the profit or loss section of the

statement of profit and loss, for the remaining net movement in all regulatory

deferral account balances for the reporting period, excluding movements that

are not reflected in profit or loss, such as amounts acquired. This separate

line item shall be distinguished from the income and expenses that are

presented in accordance with other Standards by the use of a sub-total,

which is drawn before the net movement in regulatory deferral account

balances.

Disclosure

An entity that elects to apply this Standard shall disclose information that

enables users to assess:

(a) the nature of, and the risks associated with, the rate regulation that

establishes the price(s) that the entity can charge customers for the

goods or services it provides; and

(b) the effects of that rate regulation on its financial position, financial



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Ind AS 115, Revenue from Contracts with Customers The objective of this Standard is to establish the principles that an entity shall

apply to report useful information to users of financial statements about the

nature, amount, timing and uncertainty of revenue and cash flows arising

from a contract with a customer.

Scope

The Standard applies to all contracts with customers, except the lease

contracts within the scope of Ind AS 116, Leases; insurance contracts within

the scope of Ind AS 104, Insurance Contracts; financial instruments and

other contractual rights or obligations within the scope of Ind AS 109,

Financial Instruments, Ind AS 110, Consolidated Financial Statements, Ind

AS 111, Joint Arrangements, Ind AS 27, Separate Financial Statements and

Ind AS 28, Investments in Associates and Joint Ventures; and non-monetary

exchanges between entities in the same line of business to facilitate sales to

customers or potential customers.

The core principle of Ind AS 115 is that an entity recognises revenue in the

way that depicts the transfer of promised goods or services to customers at

an amount that reflects the consideration to which the entity expects to be

entitled in exchange for those goods or services. Revenue shall be

recognised by an entity in accordance with this core principle by applying the

following five steps:

1. Identifying contract with a customer: This Standard defines a

‘contract’ and a ‘customer’ and specifies five mandatory criteria to be

met for identification of a contract.

2. Identify performance obligations in contract: At contract inception,

an entity shall assess the goods or services promised in a contract

with a customer and shall identify as a performance obligation each

promise to transfer to the customer either:

(a) a good or service (or a bundle of goods or services) that is

distinct – in other words


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— the customer can benefit from the good or service either on its

own or together with other resources that are readily available to

the customer; and

— the entity’s promise to transfer the good or service to the

customer is separately identifiable from other goods or services

in the contract; or

(b) a series of distinct goods or services that are substantially the

same and that have the same pattern of transfer to the

customer.

3. Determine transaction price: This Standard uses transaction price

approach instead of fair value approach in Ind AS 18 while determining

amount of consideration. The transaction price is the amount of

consideration to which an entity expects to be entitled in exchange for

transferring promised goods or services to a customer, excluding

amounts collected on behalf of third parties (for example, some sales

taxes). The consideration promised may include fixed amounts,

variable amounts, or both. If the consideration promised in a contract

includes a variable amount, an entity shall estimate the amount of

consideration to which the entity will be entitled in exchange for

transferring the promised goods or services to a customer. Variable

consideration is included in transaction price only to the extent that it

is highly probable that a significant reversal in the amount of

cumulative revenue recognised will not occur when the uncertainty

associated with the variable consideration is subsequently resolved,

The estimate of variable consideration can be determined by using

either the expected value method or the most likely amount method.

The transaction price is also adjusted for the effects of the time value

of money if the contract includes a significant financing component

and for any consideration payable to the customer.

Sales and usage-based royalties arising from licences of intellectual

property are excluded from the transaction price and are recognised

only when (or as) the later of the following events occurs:

(a) the subsequent sale or usage occurs; and

(b) the performance obligation to which some or all of the

salesbased or usage-based royalty has been allocated has been

satisfied (or partially satisfied).


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4. Allocate the transaction price to the performance obligations in

the contract: An entity typically allocates the transaction price to each

performance obligation on the basis of the relative stand-alone selling

prices of each distinct good or service promised in the contract. If a

stand-alone selling price is not observable, an entity estimates it.

Sometimes, the transaction price includes a discount or a variable

amount of consideration that relates entirely to a part of the contract.

The requirements specify when an entity allocates the discount or

variable consideration to one or more, but not all, performance

obligations in the contract. Any subsequent changes in the transaction

price shall be allocated to the performance obligations on the same

basis as at contract inception. Amounts allocated to a satisfied

performance obligation shall be recognised as revenue, or as a

reduction of revenue, in the period in which the transaction price

changes.

5. Recognise revenue when the entity satisfies a performance

obligation: An entity recognises revenue when it satisfies a

performance obligation by transferring a promised good or service to a

customer (which is when the customer obtains control of that good or

service). The amount of revenue recognised is the amount allocated to

the satisfied performance obligation. A performance obligation may be

satisfied at a point in time or over time. An entity transfers control of a

good or service over time and, therefore, satisfies a performance

obligation and recognises revenue over time, if one of the following

criteria is met:

— The customer simultaneously receives and consumes the

benefits provided by the entity’s performance as the entity

performs.

— The entity’s performance creates or enhances an asset that the

customer controls as the asset is created or enhanced.

— The entity’s performance does not create an asset with an

alternative use to the entity and the entity has an enforceable

right to payment for performance completed to date.

If an entity does not satisfy a performance obligation over time, the

performance obligation is satisfied at a point in time. For performance

obligations satisfied over time, an entity recognises revenue over time

by selecting an appropriate method (output methods and input


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methods) for measuring the entity’s progress towards complete

satisfaction of that performance obligation.

Treatment of Contract Costs

Ind AS 115 specifies the following requirements for contract costs:

1. Incremental costs of obtaining a contract: Those costs that an entity

incurs to obtain a contract with a customer that it would not have

incurred if the contract had not been obtained. An entity shall

recognise these costs as an asset if the entity expects to recover

those costs. Costs to obtain a contract that would have been incurred

regardless of whether the contract was obtained shall be recognised

as an expense when incurred, unless those costs are explicitly

chargeable to the customer regardless of whether the contract is

obtained.

2. Costs to fulfil a contract:

If costs incurred in fulfilling a contract are not within scope of another

Standard, entity shall recognise an asset from the costs incurred to

fulfil a contract only if some specified criteria are met. If costs incurred

in fulfilling a contract are within scope of another Standard, entity shall

account for those costs in accordance with those other Standards.

Contract costs recognised as an asset shall be amortised on a systematic

basis that is consistent with the transfer to the customer of the goods or

services to which the asset relates.

An impairment loss shall be recognised in profit or loss to the extent that the

carrying amount of contract costs recognised as an asset exceeds the

remaining amount of consideration that the entity expects to receive in

exchange for the goods or services to which the asset relates after deducting

the costs that relate directly to providing those goods or services and that

have not been recognised as expenses.

Presentation

When either party to a contract has performed, an entity shall present the

contract in the balance sheet as a contract asset or a contract liability,

depending on the relationship between the entity’s performance and the

customer’s payment. An entity shall present any unconditional rights to

consideration separately as a receivable.


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Sale with a right of return

To account for the transfer of products with a right of return (and for some

services that are provided subject to a refund), an entity shall recognise all of

the following:

revenue for the transferred products in the amount of consideration to

which the entity expects to be entitled (therefore, revenue would not

be recognised for the products expected to be returned);

a refund liability; and

an asset (and corresponding adjustment to cost of sales) for its right to

recover products from customers on settling the refund liability.

Warranties

If customer has the option to purchase warranty separately, the warranty is a

distinct service because the entity promises to provide the service to the

customer in addition to the product that has the functionality described in the

contract. In that case, entity shall account for the promised warranty as a

performance obligation and allocate a portion of the transaction price to that

performance obligation. If the warranty cannot be purchased separately, an

entity shall account for the warranty in accordance with Ind AS 37 Provisions,

Contingent Liabilities and Contingent Liabilities.

Principal versus agent considerations

When another party is involved in providing goods or services to a customer,

the entity shall determine whether the nature of its promise is a performance

obligation to provide the specified goods or services itself (i.e. the entity is a

principal) or to arrange for those goods or services to be provided by the

other party (i.e. the entity is an agent). An entity determines whether it is a

principal or an agent for each specified good or service promised to the

customer. Indicators that an entity controls the specified good or service

before it is transferred to the customer (and is therefore a principal include,

but are not limited to, the following:

(a) the entity is primarily responsible for fulfilling the promise to provide

the specified good or service

(b) the entity has inventory risk before the specified good or service has

been transferred to a customer or after transfer of control to the

customer (for example, if the customer has a right of return)


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(c) the entity has discretion in establishing the price for the specified

good or service.

Disclosure

To disclose sufficient information to enable users of financial statements to

understand the nature, amount, timing and uncertainty of revenue and cash

flows arising from contracts with customers, an entity shall disclose

qualitative and quantitative information about all of the following:

(a) its contracts with customers;

(b) the significant judgements, and changes in the judgements, made in

applying this Standard to those contracts; and

(c) any assets recognised from the costs to obtain or fulfil a contract with

a customer.

Service concession arrangements

Appendix D of Ind AS 115 gives guidance on the accounting by operators for

public-to-private service concession arrangements. This Appendix applies to

both (a) infrastructure that the operator constructs or acquires from a third

party for the purpose of the service arrangement; and (b) existing

infrastructure to which the grantor gives the operator access for the purpose

of the service arrangement. Infrastructure within the scope of this Appendix

shall not be recognised as property, plant and equipment of the operator

because the contractual service arrangement does not convey the right to

control the use of the public service infrastructure to the operator.

Transition

An entity may transition to Ind AS 115 using one of the two methods:

(a) apply standard retrospectively (with certain practical expedients) and

record the effect of applying the standard at the start of the earliest

comparative period presented; or

(b) apply the standard to open contracts at the date of initial application

and record the effect of applying the standard on that date.

Comparative period information is not restated under this option.


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Ind AS 116, Leases This Standard sets out the principles for the recognition, measurement,

presentation and disclosure of leases. The objective is to ensure that lessees

and lessors provide relevant information in a manner that faithfully

represents those transactions. This information gives a basis for users of

financial statements to assess the effect that leases have on the financial

position, financial performance and cash flows of an entity.

Scope

The standard applies to all leases, including leases of right-of-use assets in a

sublease, except for:

(a) Leases to explore for or use minerals, oil, natural gas and similar non-

regenerative resources;

(b) Leases of biological assets within the scope of Ind AS 41, Agriculture,

held by a lessee;

(c) Service concession arrangements within the scope of Appendix D,

Service Concession Arrangements of Ind AS 115, Revenue from

Contracts with Customer;

(d) Licences of intellectual property granted by a lessor within the scope

of Ind AS 115, Revenue from Contracts with Customers; and

(e) Rights held by a lessee under licensing agreements within the scope

of Ind AS 38, Intangible Assets for such items as motion picture films, video recordings, plays, manuscripts, patents and copyrights.

A lessee may, but is not required to, apply Ind AS 116 to leases of intangible

assets other than those described in point (e) above.

This Standard specifies the accounting for an individual lease. However, as a

practical expedient, an entity may apply this Standard to a portfolio of leases

with similar characteristics if the entity reasonably expects that the effects of

accounting on portfolio basis on the financial statements would not differ

materially from applying this Standard to individual leases.

Recognition exemption

In addition to the above scope exclusions, a lessee can elect not to apply the

recognition, measurement and presentation requirements of Ind AS 116 to

short-term leases; and low value leases.


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If a lessee elects for the exemption, then it shall recognise the lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another systematic basis if that basis is more representative of the pattern of the lessee’s benefit.

The election for short-term leases shall be made by class of underlying asset to which the right of use relates. The low value lease exemption can be made on a lease-by-lease basis.

A Lessee shall assess the value of an underlying asset based on the valued of the asset when it is new. The assessment of whether an underlying asset is of low value is performed on an absolute basis. Leases of low-value assets qualify for exemption regardless of whether those leases are material to the lessee. The assessment is not affected by the size, nature or circumstances of the lessee. Accordingly, different lessees are expected to reach the same conclusions about whether a particular underlying asset is of low value. Examples of low-value underlying assets can include tablet and personal computers, small items of office furniture and telephones.

If a lessee subleases an asset, or expects to sublease an asset, the head lease does not qualify as a lease of a low-value asset.

If an entity applies either exemption, it must disclose that fact and certain additional information to make the effect of the exemption known to users of its financial statements.

Lease is a contract, or part of a contract, that conveys the right to use an

asset (the underlying asset) for a period of time in exchange for

consideration.

Right-of-use asset is an asset that represents a lessee’s right to use an

underlying asset for the lease term.

Lease term is the non-cancellable period for which a lessee has the right to

use an underlying asset, together with both:

(a) periods covered by an option to extend the lease if the lessee is

reasonably certain to exercise that option; and

(b) periods covered by an option to terminate the lease if the lessee is

reasonably certain not to exercise that option.

Short-term lease is a lease that, at the commencement date, has a lease

term of 12 months or less. A lease that contains a purchase option is not a

short-term lease.


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Lease incentives are payments made by a lessor to a lessee associated

with a lease, or the reimbursement or assumption by a lessor of costs of a

lessee.

Lease payments are payments made by a lessee to a lessor relating to the

right to use an underlying asset during the lease term, comprising the

following:

(a) fixed payments (including in-substance fixed payments), less any

lease incentives;

(b) variable lease payments that depend on an index or a rate;

(c) the exercise price of a purchase option if the lessee is reasonably

certain to exercise that option; and

(d) payments of penalties for terminating the lease, if the lease term

reflects the lessee exercising an option to terminate the lease.

Finance lease is a lease that transfers substantially all the risks and rewards

incidental to ownership of an underlying asset.

Operating lease is a lease that does not transfer substantially all the risks

and rewards incidental to ownership of an underlying asset.

Identifying a lease

At inception of a contract, an entity shall assess whether the contract is, or

contains, a lease. A contract is, or contains, a lease if the contract conveys

the right to control the use of an identified asset for a period of time in

exchange for consideration.

For a contract that is, or contains, a lease, an entity shall account for each

lease component within the contract as a lease separately from non-lease

components of the contract, unless the entity applies the practical expedient

wherein, a lessee may elect, by class of underlying asset, not to separate

non-lease components from lease components, and instead account for each

lease component and any associated non-lease components as a single

lease component.

Where a contract contains a lease component and one or more additional

lease or non-lease components, a lessee shall allocate the consideration in

the contract to each lease component on the basis of the relative stand-alone

price of the lease component and the aggregate stand-alone price of the

non-lease components.


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For a contract that contains a lease component and one or more additional

lease or non-lease components, a lessor shall allocate the consideration in

the contract by applying guidance in Ind AS 115.

Lessee Accounting

At the commencement date, a lessee shall recognise

(a) a right-of-use asset measured at cost, and

(b) a lease liability measured at the present value of the lease payments

that are not paid at that date, discounted using the interest rate implicit

in the lease, if that rate can be readily determined. If that rate cannot

be readily determined, the lessee shall use the lessee’s incremental

borrowing rate.

Cost = Lease Liability + Lease payments made at or before the

commencement date – lease incentives received at or before the

commencement date + initial direct costs + estimated dismantling and

restoration costs.

Lease Payments = Fixed payments (including in-substance fixed lease

payments) – lease incentives receivable + variable payments that depend on

an index or a rate, initially measured using the index or rate as at the

commencement date + amounts expected to be payable by the lessee under

residual value guarantees + exercise price of purchase option (if reasonably

certain to be exercised) + penalties for termination (if reasonably certain to

be terminated).

In-substance fixed lease payments are payments that may, in form, contain

variability but that, in substance, are unavoidable.

Subsequent measurement

Subsequently, the right-of-use asset shall be measured by applying a cost

model or revaluation model if the underlying asset belongs to the class of

assets to which the entity applies revaluation model as per Ind AS 16,

Property, Plant and Equipment.

Subsequent meansurement - Cost model

Lessee shall measure the right-of-use asset at cost less accumulated

depreciation and any accumulated impairment losses.


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Lessees adjust the carrying amount of the right-of-use asset for

remeasurement of the lease liability, unless the carrying amount has already

been reduced to zero.

Subsequent measurement of lease liability

After initial recognition, the lease liability is measured at amortised cost using

the effective interest method and remeasuring the carrying amount to reflect

any reassessment or lease modifications or to reflect revised in-substance

fixed lease payments.

Reassessment of lease liability

After the commencement date, a lessee shall remeasure the lease liability in

accordance with the standard (using a revised discount rate or an unchanged

discount rate as applicable) to reflect changes to the lease payments. A

lessee shall recognise the amount of the remeasurement of the lease liability

as an adjustment to the right-of-use asset. However, if the carrying amount of

the right-of-use asset is reduced to zero and there is a further reduction in

the measurement of the lease liability, a lessee shall recognise any

remaining amount of the remeasurement in profit or loss.

After the commencement date, a lessee shall recognise in profit or loss,

unless the costs are included in the carrying amount of another asset

applying other applicable Standards, both:

(a) interest on the lease liability; and

(b) variable lease payments not included in the measurement of the lease

liability in the period in which the event or condition that triggers those

payments occurs.

A lessee shall account for a lease modification as a separate lease if both:

(a) the modification increases the scope of the lease by adding the right to

use one or more underlying assets; and

(b) the consideration for the lease increases by an amount commensurate

with the stand-alone price for the increase in scope and any

appropriate adjustments to that stand-alone price to reflect the

circumstances of the particular contract.

Where a lease modification is not accounted for as a separate lease, at the

effective date of the lease modification a lessee shall:


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(a) allocate the consideration in the modified contract;

(b) determine the lease term of the modified lease; and

(c) remeasure the lease liability by discounting the revised lease

payments using a revised discount rate. The lessee shall account for

the remeasurement of the lease liability by:

(a) decreasing the carrying amount of the right-of-use asset to

reflect the partial or full termination of the lease for lease

modifications that decrease the scope of the lease. The lessee

shall recognise in profit or loss any gain or loss relating to the

partial or full termination of the lease.

(b) making a corresponding adjustment to the right-of-use asset for

all other lease modifications.

A lessee shall either present in the balance sheet, or disclose in the notes:

(a) right-of-use assets separately from other assets. If a lessee does not

present right-of-use assets separately in the balance sheet, the lessee

shall:

(i) include right-of-use assets within the same line item as that within

which the corresponding underlying assets would be presented if

they were owned; and

(ii) disclose which line items in the balance sheet include those right-

of-use assets.

(b) lease liabilities separately from other liabilities. If a lessee does not

present lease liabilities separately in the balance sheet, the lessee

shall disclose which line items in the balance sheet include those

liabilities.

The above requirement does not apply to right-of-use assets that meet the

definition of investment property, which shall be presented in the balance

sheet as investment property.

In the statement of profit and loss, a lessee shall present interest expense on

the lease liability separately from the depreciation charge for the right-of-use

asset.


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Lessor Accounting

A lessor shall classify each of its leases as either an operating lease or a

finance lease.

A lease is classified as a finance lease if it transfers substantially all the risks

and rewards incidental to ownership of an underlying asset. A lease is

classified as an operating lease if it does not transfer substantially all the

risks and rewards incidental to ownership of an underlying asset.

In a sub-lease transaction, the intermediate lessor accounts for the head

lease and the sub-lease as two separate contracts. An intermediate lessor

classifies a sublease with reference to the right-of-use asset arising from the

head lease.At the commencement date, a lessor shall recognise assets held

under a finance lease in its balance sheet and present them as a receivable

at an amount equal to the net investment in the lease.

At the commencement date, a manufacturer or dealer lessor shall recognise

the following for each of its finance leases:

(a) revenue being the fair value of the underlying asset, or, if lower, the

present value of the lease payments accruing to the lessor, discounted

using a market rate of interest;

(b) the cost of sale being the cost, or carrying amount if different, of the

underlying asset less the present value of the unguaranteed residual

value; and

(c) selling profit or loss (being the difference between revenue and the

cost of sale) in accordance with its policy for outright sales to which

Ind AS 115 applies. A manufacturer or dealer lessor shall recognise

selling profit or loss on a finance lease at the commencement date,

regardless of whether the lessor transfers the underlying asset as

described in Ind AS 115.

Subsequently, a lessor in a finance lease shall recognise finance income

over the lease term, based on a pattern reflecting a constant periodic rate of

return on the lessor’s net investment in the lease.

A lessor shall recognise lease payments from operating leases as income on

either a straight-line basis or another systematic basis. The lessor shall apply

another systematic basis if that basis is more representative of the pattern in

which benefit from the use of the underlying asset is diminished. A lessor


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shall present underlying assets subject to operating leases in its balance

sheet according to the nature of the underlying asset.

Lease Payments = Fixed payments (including in-substance fixed lease

payments) – lease incentives payable + variable payments that depend on an

index or a rate, initially measured using the index or rate as at the

commencement date + residual value guarantees provided to the lessor by

the lessee + exercise price of purchase option (if lessee is reasonably certain

to exercise) + penalties for termination (if lease term reflects same).

Gross investment in the lease = lease payments + unguaranteed residual

value.

Net investment in the lease = The gross investment in the lease discounted

at the interest rate implicit in the lease.

Sale and leaseback transactions

Determine whether transfer of asset is a sale of that asset as per

requirement of Ind AS 115

transfer of asset is a sale transfer of asset is a not a sale

Transaction will be accounted for as a

sale and a lease by both the lessee

and the lessor.

Transaction will be accounted for as

a financing arrangement by both the

seller-lessee and the buyer-lessor

Seller-lessee

Measure right-of-use asset at

proportion of previous carrying

amount of asset relating to right-

of-use asset retained by seller-

lessee.

Recognise only amount of gain or

loss relating to rights transferred

to buyer-lessor.

Buyer-lessor

Account for purchase of asset

applying applicable standards.

Seller-lessee

Continue to recognise

transferred asset.

Recognise financial liability

equal to transfer proceeds

applying Ind AS 109.

Buyer-lessor

Not recognise transferred

asset.

Recognise financial asset

equal to transfer proceeds

applying Ind AS 109.


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Account for lease applying lessor

accounting requirements under

Ind AS 116.

Disclosures

A lessee shall disclose the following amounts for the reporting period:

a. depreciation charge for right-of-use assets by class of underlying asset;

b. interest expense on lease liabilities;

c. the expense relating to short-term leases. This expense need not include the expense relating to leases with a lease term of one month or less;

d. the expense relating to leases of low-value assets. This expense shall not include the expense relating to short-term leases of low-value assets included in paragraph 53(c);

e. the expense relating to variable lease payments not included in the measurement of lease liabilities;

f. income from subleasing right-of-use assets;

g. total cash outflow for leases;

h. additions to right-of-use assets;

i. gains or losses arising from sale and leaseback transactions; and

j. the carrying amount of right-of-use assets at the end of the reporting period by class of underlying asset.

A lessor shall disclose the following amounts for the reporting period:

(a) for finance leases:

(i) selling profit or loss;

(ii) finance income on the net investment in the lease; and

(iii) income relating to variable lease payments not included in the measurement of the net investment in the lease.

(b) for operating leases, lease income, separately disclosing income relating to variable lease payments that do not depend on an index or a rate.


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A lessor shall provide a qualitative and quantitative explanation of the significant changes in the carrying amount of the net investment in finance leases.

A lessor shall disclose a maturity analysis of the lease payments receivable, showing the undiscounted lease payments to be received on an annual basis for a minimum of each of the first five years and a total of the amounts for the remaining years. A lessor shall reconcile the undiscounted lease payments to the net investment in the lease.

Transition date accounting

Definition of lease

On the date of initial application of Ind AS 116, companies have an option

not to reassess its previously identified leases contracts (as per Ind AS 17,

Leases) and apply the transition provisions of this standard to those leases.

Also, they have an option not to apply this Standard to contracts that were

not previously identified as containing a lease applying Ind AS 17.

If an entity chooses the above options then it shall disclose that fact and

apply the practical expedient to all of its contracts.

Transition accounting: In the books of Lessee

A lessee is permitted to:

adopt the standard retrospectively; or

follow a modified retrospective approach.

A lessee applies the election consistently to all of its leases.


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Ind AS 1, Presentation of Financial Statements This Standard prescribes the basis for presentation of general purpose

financial statements to ensure comparability both with the entity’s financial

statements of previous periods and with the financial statements of other

entities. It sets out overall requirements for the presentation of financial

statements, guidelines for their structure and minimum requirements for their

content.

Complete set of financial statements

A complete set of financial statements, which should be presented, including

comparatives, at least annually consists of:

(a) a balance sheet as at the end of the period;

(b) a statement of profit and loss for the period;

(c) a statement of changes in equity for the period;

(d) a statement of cash flows for the period;

(e) notes, comprising significant accounting policies and other

explanatory information;

(f) comparative information in respect of the preceding period.

An entity shall prepare a third balance sheet as at the beginning of the

previous year along with the requirements of comparative information for the

year if, it retrospectively applies accounting policies, retrospectively restates

items in financial statements, or reclassifies items in financial statements.

General features of financial statements

present true and fair presentation and compliance with Ind AS.

prepare financial statements on a going concern basis unless

management either intends to liquidate the entity or to cease trading,

or has no realistic alternative but to do so.

prepare using the accrual basis of accounting, except for cash flow

information.

present separately each material class of similar items.


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present separately items of a dissimilar nature or function unless they

are immaterial except when required by law.

shall not offset assets and liabilities or income and expenses, unless

required or permitted by an Ind AS.

present comparative information in respect of the preceding period for

all amounts reported in the current period’s financial statements.

shall retain the presentation and classification of items in the financial

statements from one period to the next unless:

— it is apparent, following a significant change in the nature of the

entity’s operations or a review of its financial statements, that

another presentation or classification would be more

appropriate; or

— an Ind AS requires a change in presentation.

An entity whose financial statements comply with Ind ASs should make an

explicit and unreserved statement of such compliance in the notes. An entity

should not describe financial statements as complying with Ind ASs unless

they comply with all the requirements of Ind ASs

Structure and content

Ind AS 1 does not provide a format for presenting financial statements;

however it provides line items to be presented, if they are material, in the

balance sheet, statement of profit and loss and statement of changes in

equity. The format of presentation of financial statements is provided in

Schedule III to the Companies Act, 2013.

Balance Sheet

The balance sheet shall include line items that present the following

amounts:

(i) In respect of equity: Issued capital and reserves attributable to owners

of the parent and non-controlling interests.

(ii) In respect of assets: Property, plant and equipment; investment

property; intangible assets; financial assets; investments accounted for

using the equity method; biological assets; inventories; trade and other

receivables; cash and cash equivalents; current tax assets; deferred

tax assets.


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(iii) In respect of liabilities: trade and other payables; provisions; financial

liabilities; current tax liabilities; deferred tax liabilities.

(iv) In respect of assets and liabilities held for sale: total of assets

classified as held for sale and assets included in disposal groups

classified as held for sale; and liabilities included in disposal groups

classified as held for sale in accordance with Ind AS 105 Non-current

Assets Held for Sale and Discontinued Operations.

An entity should classify all the assets and liabilities as current and non-

current in its balance sheet except when a presentation based on liquidity

provides information that is reliable and more relevant.

Current Asset Current Liability

Expected to be realised , used

or sold in normal operating

cycle; or

Expected to be settled in

normal operating cycle; or

Held primarily for trading; or Held primarily for trading; or

Expected to be realised within

12 months after the reporting

date; or

Due to be settled within 12

months of reporting date; or

Cash or cash equivalent. It does not have an

unconditional right to defer

settlement of the liability for at

least twelve months after the

reporting period.

An entity shall classify all other

assets as non-current.

An entity shall classify all other

liabilities as non-current.

Statement of Profit and Loss

The statement of profit and loss should present, in addition to the profit or

loss and other comprehensive income sections:

(a) profit or loss;

(b) total other comprehensive income;

(c) comprehensive income for the period, being the total of profit or loss

and other comprehensive income.


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Other comprehensive income comprises items of income and expense

(including reclassification adjustments*) that are not recognised in profit

or loss as required or permitted by other Ind ASs.

Total comprehensive income is the change in equity during a period

resulting from transactions and other events, other than those changes

resulting from transactions with owners in their capacity as owners.

Total Comprehensive Income = Profit or Loss + Other Comprehensive

Income

*Reclassification adjustments are amounts reclassified to profit or loss

in the current period that were recognised in other comprehensive

income in the current or previous periods.

Any items of income or expense as extraordinary items shall not be

presented in the statement of profit and loss or in the notes. An analysis of

expenses recognised in profit or loss shall be presented using a classification

based on the nature of expense method.

An entity shall present additional line items, headings and subtotals in the

balance sheet and statement of profit and loss when such presentation is

relevant to an understanding of the entity’s financial position and

performance.

Statement of changes in equity

The statement of changes in equity includes the following information:

(a) total comprehensive income for the period, showing separately the

total amounts attributable to owners of the parent and to non-

controlling interests;

(b) for each component of equity, the effects of retrospective application

or retrospective restatement recognised in accordance with Ind AS 8;

(c) for each component of equity, a reconciliation between the carrying

amount at the beginning and the end of the period, separately (as a

minimum) disclosing changes resulting from:

(i) profit or loss;

(ii) other comprehensive income;


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(iii) transactions with owners in their capacity as owners, showing

separately contributions by and distributions to owners and

changes in ownership interests in subsidiaries that do not result

in a loss of control; and

(iv) any item recognised directly in equity such as amount

recognised directly in equity as capital reserve in accordance

with Ind AS 103, Business Combinations.

Information to be presented in the statement of changes in equity or in the notes

An entity shall present, either in the statement of changes in equity or in the

notes:

— the amount of dividends recognised as distributions to owners during

the period, and the related amount of dividends per share; and

— for each component of equity, an analysis of other comprehensive

income by item.

Statement of cash flows

The statement of cash flows should be presented as per Ind AS 7, Statement

of Cash Flows.

Notes to the financial statements

The notes shall present information about the basis of preparation of the

financial statements and the specific accounting policies used; disclose the

information required by Ind ASs that is not presented elsewhere in the

financial statements; and provide information that is not presented elsewhere

in the financial statements, but is relevant to an understanding of any of

them.

An entity shall disclose its significant accounting policies comprising the

measurement basis (or bases) used in preparing the financial statements;

and the other accounting policies used that are relevant to an understanding

of the financial statements.

Notes also includes information about the assumptions that an entity makes

about the future, and other major sources of estimation uncertainty at the

end of the reporting period, disclosures on capital and puttable financial

instruments classified as equity.


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Ind AS 2, Inventories Ind AS 2 prescribes the accounting treatment for inventories, such as,

determination of cost and its subsequent recognition as expense, including

any write-downs of inventories to net realisable value and reversal of write-

downs.

An exception from the measurement principle in Ind AS 2 for inventories held

by:

producers of agricultural and forest products, agricultural produce

after harvest, and minerals and mineral products, to the extent that

they are measured at net realisable value in accordance with well-

established practices in those industries.

commodity broker-traders who measure their inventories at fair value

less costs to sell.

Changes in the fair value less costs to sell, or in the net realisable value, of

such inventories are recognised in profit or loss in the period of the change

Inventories are assets:

held for sale in ordinary course of business

in the process of production of sales in ordinary course of business

in the form of material or supplies to be consumed in the production

process or rendering of services.

Do not include spare parts, servicing equipment and standby equipment

which meet the definition of PPE in Ind AS 16.

Excluded Inventories

(Not dealt under Ind AS 2)

Financial instruments ( covered by Ind AS 32 and Ind AS 109)

Biological assets related to agricultural activity

Agricultural produce at the point of harvest


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Measurement of Inventory- Lower of Cost and Net Realisable Value

Cost of Inventories includes

Cost of purchase;

Cost of conversion;

Cost to bring inventories to the

present location and condition.

Net Realisable Value includes

Estimated selling price in the

ordinary course of business less

the estimated costs of completion

and the estimated costs

necessary to make the sale.

Materials and other supplies held for use in the production of

inventories are not written down below cost if the finished products in

which they will be incorporated are expected to be sold at or above

cost.

However, when a decline in the price of materials indicates that the

cost of the finished products exceeds net realisable value, the

Cost of purchase

Purchase price exclusing trade discounts, rebates, etc.

Import duties and taxes to the extent non refundable

Transport and handling costs directly attributable

Other expenditure directly attributable to the acquisition

Cost of conversion

Allocation of fixed production overheads based on normal capacity

Variable production overheads assigned to each unit of production on the basis of the actual use of production facilities

Examples of cost exclusions

Abnormal wastage

Storage costs unless necessary in production process prior to a further production stage

Selling and distribution costs

Administrative overheads that do not contribute to bringing the inventories to their present location and condition

selling costs


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materials are written down to net realisable value. In such

circumstances, the replacement cost of the materials may be the best

available measure of their net realisable value.

When inventories are sold, the carrying amount of those inventories shall be

recognised as an expense in the period in which the related revenue is

recognised. The amount of any write-down of inventories to net realisable

value and all losses of inventories shall be recognised as an expense in the

period the write-down or loss occurs. The amount of any reversal of any

write-down of inventories, arising from an increase in net realisable value,

shall be recognised as a reduction in the amount of inventories recognised

as an expense in the period in which the reversal occurs.

Cost Formulas

The cost of inventories of items that are not ordinarily interchangeable and

goods or services produced and segregated for specific projects shall be

assigned by using specific identification of their individual costs.

Specific identification of cost means that specific costs are attributed

to identified items of inventory.

The cost of inventories, other than those above shall be assigned by using:

First-in, first-out (FIFO) or

Weighted average cost formula.

An entity shall use the same cost formula for all inventories having a similar

nature and use to the entity. For inventories with a different nature or use,

different cost formulas may be justified.


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Ind AS 7, Statement of Cash Flows The objective of this Standard is to require the provision of information about

the historical changes in cash and cash equivalents of an entity by means of

a statement of cash flows which classifies cash flows during the period from

operating, investing and financing activities.

Cash comprises cash on hand and demand deposits.

Cash equivalents are short term, highly liquid investments that are

readily convertible into known amounts of cash and which are subject

to an insignificant risk of changes in value.

An investment normally qualifies as a cash equivalent only when it has a

short maturity of, say, 3 months or less from the date of acquisition.

Presentation of a Statement of Cash Flow

The statement of cash flows shall report cash flows during the period

classified by operating, investing and financing activities.

Operating activities

Principal revenue-producing activities and other activities that are

not investing or financing activities

Investing activities

Acquisition and disposal of long-term assets and other investments not

included in cash equivalents

Financing activities

Activities that result in changes in the size and

composition of the contributed equity and borrowings of the entity


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Unrealised gains and losses arising from changes in foreign

currency exchange rates are not cash flows.

Classification of Interest and Dividends

Non-Financial Institution

Interest paid Interest received Dividend Paid Dividend received

Financing

Activities

Investing

Activities

Financing

Activities

Investing Activities

Reporting methods (Cash flow from operating activities)

Direct method

Major classes of gross cash receipts and payments in

respect of operating activities are presented

Indirect Method

Profit/Loss is adjusted for effects of transactions of non-cash nature, deferrals or accruals of past or

future operating cash receipts or payments, and income and expense items associated with

investing or financing cash flows

Reporting of foreign currency cash flow

Cash flow arising from transactions in a foreign

currency

To be recorded in the functional currency of the entity using the

exchange rate between the functional currency and the foreign currency at the date of cash flow

Effects of changes in exchange rates on cash and cash

equivalents held in a foreign currency"

To be reported as a separate part of the reconciliation of the changes in cash

and cash equivalents at the beginning and the end of the period


85

Financial Institution

Interest paid Interest received Dividend Paid Dividend received

Operating

Activities

Operating

Activities

Financing

Activities

Operating Activities

Taxes on income - Cash flows arising from taxes on income shall be

separately disclosed and shall be classified as cash flows from operating

activities unless they can be specifically identified with financing and

investing activities.

Changes in ownership interests in subsidiaries and other businesses -

The aggregate cash flows arising from obtaining or losing control of

subsidiaries or other businesses shall be presented separately and classified

as investing activities.

Non-cash transactions – Non-cash transactions (i.e., investing and

financing transactions that do not require the use of cash or cash

equivalents) shall be excluded from a statement of cash flows. Such

transactions shall be disclosed elsewhere in the financial statements in a way

that provides all the relevant information about these investing and financing

activities.

Changes in liabilities arising from financing activities - An entity shall

provide disclosures that enable users of financial statements to evaluate

changes in liabilities arising from financing activities, including both changes

arising from cash flows and non-cash changes.

Components of cash and cash equivalents - An entity shall disclose the

components of cash and cash equivalents and shall present a reconciliation

of the amounts in its statement of cash flows with the equivalent items

reported in the balance sheet.

Other disclosures - An entity shall disclose, together with a commentary by

management, the amount of significant cash and cash equivalent balances

held by the entity that are not available for use by the group in its

consolidated as well as separate financial statements.


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Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors Ind AS 8 specifies the criteria for selecting and changing accounting policies,

together with the accounting treatment and disclosure of changes in

accounting policies, changes in accounting estimates and corrections of

errors. The Standard is intended to enhance the relevance and reliability of

an entity’s financial statements, and the comparability of those financial

statements over time and with the financial statements of other entities.

The disclosures required in respect of changes in accounting policies are set

out in Ind AS 8. Other disclosure requirements for accounting policies are

laid down in Ind AS 1, Presentation of Financial Statements.

Accounting Policies are the specific principles, bases, conventions, rules

and practices applied by an entity in preparing and presenting financial

statements.

Selection and application of accounting policies

In case specific Ind AS exists - accounting policy shall be determined as per

the applicable Ind AS.

In case no specific Ind AS exists – management shall use its judgment to

develop and apply accounting policy that results in information that is:

relevant to the economic decision-making needs of users; and

reliable, such that the financial statement:

represent faithfully the financial position, financial performance

and cash flows of the entity;

reflect the economic substance of transactions, other events and

conditions, and not merely the legal form;

are neutral, i.e. free from bias;

are prudent; and

are complete in all material respects.


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In making the above judgment consider the following sources in

descending order:-

requirements in Ind ASs dealing with similar and related issues;

the definitions, recognition criteria and measurement concepts for

assets, liabilities, income and expenses in the Framework; and

most recent pronouncements of International Accounting Standards

Board and in absence thereof those of the other standard-setting bodies

that use a similar conceptual framework to develop accounting

standards, other accounting literature and accepted industry practices to

the extent that these do not conflict with the above mentioned sources.

Changes in accounting policies

An entity shall change an accounting policy only if the change:

(a) is required by an Ind AS; or

(b) results in the financial statements providing reliable and more relevant

information about the effects of transactions, other events or conditions

on the entity’s financial position, financial performance or cash flows.

A change in accounting policy shall be applied retrospectively except to the

extent that it is impracticable to determine either the period-specific effects or

the cumulative effect of the change.

The Standard clarifies that initial application of a policy to revalue assets in

accordance with Ind AS 16, Property, Plant and Equipment, or Ind AS 38,

Intangible Assets, is a change in an accounting policy to be dealt with as a

Accounting for change in accounting

policy

Initial application of

Ind AS

Transition provisions exist

As per transition provisions

Transition provisions do

not exist

Retrospective application

Voluntary change in accounting

policyRetrospective

application


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revaluation in accordance with Ind AS 16 or Ind AS 38, rather than in

accordance with Ind AS 8.

Changes in accounting estimates

A change in accounting estimate is an adjustment of the carrying amount of

an asset or a liability, or the amount of the periodic consumption of an asset,

that results from the assessment of the present status of, and expected

future benefits and obligations associated with, assets and liabilities.

Prior period errors

Prior period errors are omissions from, and misstatements in, the entity’s

financial statements for one or more prior periods arising from a failure to

use, or misuse of, reliable information that:

was available when financial statements for those periods were

approved for issue; and

could reasonably be expected to have been obtained and taken into

account in the preparation and presentation of those financial

statements.

An entity should correct material prior period errors retrospectively in the first

set of financial statements approved for issue after their discovery by:

restating the comparative amounts for the prior period(s) presented in

which the error occurred; or

if the error occurred before the earliest prior period presented,

restating the opening balances of assets, liabilities and equity for the

earliest prior period presented.

A prior period error shall be corrected by retrospective restatement except to

the extent that it is impracticable to determine either the period-specific

effects or the cumulative effect of the error.

Changes in accounting estimates

to the extent relates to changes in asset and

liabilities or equity

adjust carrying amount of asset, liability or equity in

period of change.

any other changesrecognise prospectively in

profit or loss of the period(s) affected.


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Retrospective and Prospective

Retrospective application is applying a new accounting policy to

transactions, other events and conditions as if that policy had always been

applied.

Retrospective restatement is correcting the recognition, measurement and

disclosure of amounts of elements of financial statements as if a prior period

error had never occurred.

It is impracticable to apply a change in an accounting policy retrospectively

or to make a retrospective restatement to correct an error if:

the effects of the retrospective application or retrospective restatement

are not determinable;

the retrospective application or retrospective restatement requires

assumptions about what management’s intent would have been in that

period; or

Impractiable retrospective application or restatement to comparative information

Period specific effects of


Apply to carrying amount of assets and liabilities as at

the beginning of the earliest period for

which retrospective restatement is practicable and corresponding

adjustment to the opening balance of

each affected component of equity

for that period.

Errors

Restate opening

balances of asset,

liabilities and equity for

earliest period for which

retrospective restatement is

practicable.

Cumulative effects of


Adjust comparative

information to apply new accounting

policy prospectively from earliest

date practicable.

Errors

Restate comparative

information to correct the

error prospectively from earliest

date practicable.


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the retrospective application or retrospective restatement requires

significant estimates of amounts and it is impossible to distinguish

objectively information about those estimates that:

provides evidence of circumstances that existed on the date(s) as

at which those amounts are to be recognised, measured or

disclosed; and

would have been available when the financial statements for that

prior period were approved for issue from other information.

Prospective application of a change in accounting policy and of recognising

the effect of a change in an accounting estimate, respectively, are:

applying the new accounting policy to transactions, other events and

conditions occurring after the date as at which the policy is changed;

and

recognising the effect of the change in the accounting estimate in the

current and future periods affected by the change.


91

Ind AS 10, Events after the Reporting Period There is always a time lag between the end of the reporting period and the

date on which the financial statements are approved for issue. Thus, a

question arises should the events that occur between the said two dates

have an impact on the financial statements. If yes, to what extent? How

should these be reflected? Should these be disclosed? Indian Accounting

Standard (Ind AS) 10 provides guidance on these and similar issues.

The objective of this Standard is to prescribe:

(a) when an entity should adjust its financial statements for events after

the reporting period; and

(b) the disclosures that an entity should give about the date when the

financial statements were approved for issue and about events after


Events after the reporting period are those events, favourable and

unfavourable, that occur between the end of the reporting period and the

date when the financial statements are approved by the Board of Directors in

case of a company, and, by the corresponding approving authority in case of

any other entity for issue. Two types of events can be identified:

Adjusting events after the reporting period - those that provide

evidence of conditions that existed at the end of the reporting period.

Non-adjusting events after the reporting - those that are indicative of

conditions that arose after the reporting.

Exception: Where there is a breach of a material provision of a long-term

loan arrangement on or before the end of the reporting period with the effect

that the liability becomes payable on demand on the reporting date, the

agreement by lender before the approval of the financial statements for

issue, to not demand payment as a consequence of the breach, shall be

considered as an adjusting event.


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The following is an example of adjusting events after the reporting period that

require an entity to adjust the amounts recognised in its financial statements,

or to recognise items that were not previously recognised.

Settlement of a court case: The settlement arrived at after the reporting

period of a court case that confirms that the entity had a present obligation at

the end of the reporting period. In this case, the entity adjusts any previously

recognised provision related to this court case in accordance with Ind AS 37,

Provisions, Contingent Liabilities and Contingent Assets, or recognises a

new provision. The entity does not merely disclose a contingent liability

because the settlement provides additional evidence that would be

considered in accordance with paragraph 16 of Ind AS 37.

Some examples of non-adjusting events after the reporting period that would

generally result in disclosure are as follows:

announcing a plan to discontinue an operation;

the destruction of a major production plant by a fire after the reporting

period.

Dividends

If an entity declares dividends to holders of equity instruments after the

reporting period, the entity shall not recognise those dividends as a liability at

the end of the reporting period.

Going concern

An entity should not prepare its financial statements on a going concern

basis if management determines after the reporting period either that it

Events after reporting period

Adjusting Event

Adjust the financial statements

Non-Adjusting event

No adjustments to the financial statements


93

intends to liquidate the entity or to cease trading, or that it has no realistic

alternative but to do so.

It may be noted that the entity shall make disclosures as specified in Ind AS

1, Presentation of Financial Statements, if:

the financial statements are not prepared on a going concern basis; or

the management is aware of material uncertainties related to events or

conditions that may cast significant doubt upon the entity’s ability to

continue as a going concern. These events or conditions requiring

disclosure may arise after the reporting period.

Date when financial statements are approved for issue

The Standard requires an entity to disclose:

the date when the financial statements were approved for issue;

who gave this approval; and

the fact that the entity’s owners or others have the power to modify the

financial statements after issue.

These disclosures are necessary as it is important for users to know when

the financial statements were approved for issue as the financial statements

do not reflect the events after this date.

Updating disclosure about conditions at the end of the reporting period

If an entity receives information after the reporting period about conditions

that existed at the end of the reporting period, it shall update disclosures that

relate to those conditions, in the light of the new information.

If non-adjusting events after the reporting period are material, non-disclosure

could influence the economic decisions that users make on the basis of the

financial statements, the entity should disclose the following for each material

category of non-adjusting event after the reporting period:

(a) the nature of the event; and

(b) an estimate of its financial effect, or a statement that such an estimate

cannot be made.


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Distribution of Non-cash Assets to Owners

Appendix A of Ind AS 10 provides guidance with regard to distribution of

noncash assets as dividends to owners. The Appendix prescribes that the

liability to pay a dividend shall be recognised when the dividend is

appropriately authorised and is no longer at the discretion of the entity. This

liability shall be measured at the fair value of the assets to be distributed.

Any difference between the carrying amount of the assets distributed and the

carrying amount of the dividend payable should be recognised in profit or

loss when an entity settles the dividend payable.


95

Ind AS 12, Income Taxes Ind AS 12 prescribes the accounting treatment for income taxes. For the

purposes of this Standard, income taxes include all domestic and foreign

taxes which are based on taxable profits. Income taxes also include taxes,

such as withholding taxes, which are payable by a subsidiary, associate or

joint venture on distributions to the reporting entity. The principal issue in

accounting for income taxes is how to account for the current and future tax

consequences of:

(a) the future recovery (settlement) of the carrying amount of assets

(liabilities) that are recognised in an entity’s balance sheet; and

(b) transactions and other events of the current period that are recognized

in an entity’s financial statements.

Ind AS 12 also deals with the recognition of deferred tax assets arising from

unused tax losses or unused tax credits, the presentation of income taxes in

the financial statements and the disclosure of information relating to income

taxes.

Ind AS 12 is based on balance sheet approach. It requires recognition of tax

consequences of difference between the carrying amounts of assets and

liabilities and their tax base.

Tax base of-

an asset a liability

amount that will be deductible for tax purposes against any taxable economic benefits that will flow to an entity when it recovers the carrying amount of the asset. If those economic benefits will not be taxable, the tax base of the asset is equal to its carrying amount.

carrying amount less any amount that will be deductible for tax purposes in respect of that liability in future periods. In the case of revenue which is received in advance, the tax base is its carrying amount, less any amount of the revenue that will not be taxable in future periods.

Where tax base is not immediately apparent, with certain limited exceptions recognise a deferred tax liability (asset) whenever recovery or settlement of the carrying amount of an asset or liability would make future tax payments larger (smaller) than they would be if such recovery or settlement were to have no tax consequences.


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Current tax for current and prior periods shall, to the extent unpaid, be

recognised as a liability. If the amount already paid in respect of current and

prior periods exceeds the amount due for those periods, the excess shall be

recognised as an asset. The benefit relating to a tax loss that can be carried

back to recover current tax of a previous period shall be recognised as an

asset.

Temporary differences are differences between the carrying amount

of an asset or liability in the balance sheet and its tax base.

Taxable temporary differences - temporary differences that will

result in taxable amounts in determining taxable profit (tax loss) of

future periods when the carrying amount of the asset or liability is

recovered or settled.

Deductible temporary differences - temporary differences that will

result in amounts that are deductible in determining taxable profit (tax

loss) of future periods when the carrying amount of the asset or

liability is recovered or settled.

Deferred tax liabilities are the amounts of income taxes payable in future

periods in respect of taxable temporary differences.

Deferred tax assets are the amounts of income taxes recoverable in future

periods in respect of:

(a) deductible temporary differences;

(b) the carry forward of unused tax losses; and

(c) the carry forward of unused tax credits.

A deferred tax liability should be recognised for all taxable temporary

differences, except to the extent that the deferred tax liability arises from the

initial recognition of goodwill or the initial recognition of an asset or liability in

Temporary Difference

Taxable

Deferred tax liability

Deductible

Deferred tax asset


97

a transaction which is not a business combination and at the time of the

transaction, affects neither accounting profit nor taxable profit (tax loss). It is

inherent in the recognition of an asset or liability that the reporting entity

expects to recover or settle the carrying amount of that asset or liability. If it

is probable that recovery or settlement of that carrying amount will make

future tax payments larger (smaller) than they would be if such recovery or

settlement were to have no tax consequences, this Standard requires an

entity to recognise a deferred tax liability (deferred tax asset), with certain

limited exceptions.

A deferred tax asset should be recognised for all deductible temporary

differences to the extent that it is probable that taxable profit will be available

against which the deductible temporary difference can be utilised, unless the

deferred tax asset arises from the initial recognition of an asset or liability in

a transaction that is not a business combination and at the time of the

transaction, affects neither accounting profit nor taxable profit (tax loss).

Unused tax losses and tax credits

A deferred tax asset should be recognised for the carry forward of unused

tax losses and unused tax credits to the extent that it is probable that future

taxable profit will be available against which the unused tax losses and

unused tax credits can be utilised.

It is inherent in the recognition of a liability that the carrying amount will be

settled in future periods through an outflow from the entity of resources

embodying economic benefits. When resources flow from the entity, part or

all of their amounts may be deductible in determining taxable profit of a

period later than the period in which the liability is recognised. In such cases,

a temporary difference exists between the carrying amount of the liability and

its tax base.

An entity recognises deferred tax assets only when it is probable that taxable

profits will be available against which the deductible temporary differences

can be utilised.

When an entity assesses whether taxable profits will be available against

which it can utilise a deductible temporary difference, it considers whether

tax law restricts the sources of taxable profits against which it may make

deductions on the reversal of that deductible temporary difference. If tax law

imposes no such restrictions, an entity assesses a deductible temporary


98

difference in combination with all of its other deductible temporary

differences. However, if tax law restricts the utilisation of losses to deduction

against income of a specific type, a deductible temporary difference is

assessed in combination only with other deductible temporary differences of

the appropriate type.

Measurement

Current tax liabilities (assets) for the current and prior periods shall be

measured at the amount expected to be paid to (recovered from) the taxation

authorities, using the tax rates (and tax laws) that have been enacted or

substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities shall be measured at the tax rates that are

expected to apply to the period when the asset is realised or the liability is

settled, based on tax rates (and tax laws) that have been enacted or

substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities should not be discounted.

Current and Deferred tax

Relates to transaction recognised

in

Current and Deferred tax is

recognised

Other comprehensive income In other comprehensive income

Equity In Equity

Any other As income or expense in profit or

loss

Offsetting

An entity shall offset current tax assets and current tax liabilities if, and only

if, the entity:

(a) has a legally enforceable right to set off the recognised amounts; and

(b) intends either to settle on a net basis, or to realise the asset and settle

the liability simultaneously.

An entity shall offset deferred tax assets and deferred tax liabilities if, and only if:


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(a) the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and

(b) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

I. the same taxable entity; or

II. different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Disclosure

The major components of tax expense (income) shall be disclosed separately.

Allocation

This Standard requires an entity to account for the tax consequences of transactions and other events in the same way that it accounts for the transactions and other events themselves. Thus, for transactions and other events recognised in profit or loss, any related tax effects are also recognised in profit or loss. For transactions and other events recognised outside profit or loss (either in other comprehensive income or directly in equity), any related tax effects are also recognised outside profit or loss (either in other comprehensive income or directly in equity, respectively). Similarly, the recognition of deferred tax assets and liabilities in a business combination affects the amount of goodwill arising in that business combination or the amount of the bargain purchase gain recognised.

Appendix A of Ind AS 12 addresses how an entity should account for the tax consequences of a change in its tax status or that of its shareholders. The Appendix prescribes that a change in the tax status of an entity or its shareholders does not give rise to increases or decreases in amounts recognised outside profit or loss.

Uncertainty over Income Tax Treatments

Appendix C of this Standard clarifies how to apply the recognition and

measurement requirements in Ind AS 12 when there is uncertainty over

income tax treatments.


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Ind AS 16, Property, Plant and Equipment The objective of this Standard is to prescribe the accounting treatment for

property, plant and equipment so that users of the financial statements can

discern information about an entity’s investment in its property, plant and

equipment and the changes in such investment. The principal issues in

accounting for property, plant and equipment are the recognition of the

assets, the determination of their carrying amounts and the depreciation

charges and impairment losses to be recognised in relation to them.

Property, plant and equipment are tangible items that:

(a) are held for use in the production or supply of goods or services, for

rental to others, or for administrative purposes; and

(b) are expected to be used during more than one period.

Recognition

The cost of an item of property, plant and equipment shall be recognised as

an asset if, and only if:

(a) it is probable that future economic benefits associated with the item

will flow to the entity; and

(b) the cost of the item can be measured reliably.

Items such as spare parts, stand-by equipment and servicing

equipment are recognised as property, plant or equipment if they

meet the definition. Otherwise, such items are classified as

inventory.

Measurement at recognition

An item of property, plant and equipment that qualifies for recognition as an

asset shall be measured at its cost.


101

Examples of directly attributable costs are costs of site preparation; initial

delivery and handling costs; installation and assembly costs, etc.

Examples of costs that are not costs of an item of property, plant and

equipment are costs of opening a new facility; costs of conducting business

in a new location or with a new class of customer (including costs of staff

training); administration and other general overhead costs, etc.

Examples of costs that are not included in the carrying amount of an item of

property, plant and equipment are costs incurred while an item capable of

operating in the manner intended by management has yet to be brought into

use or is operated at less than full capacity; initial operating losses, such as

those incurred while demand for the item’s output builds up; and costs of

relocating or reorganising part or all of an entity’s operations.

The income and related expenses of incidental operations are

recognised in profit or loss.

PPE acquired in exchange for a non-monetary asset or assets or a

combination of monetary and non-monetary assets

The cost of such an item of PPE is measured at fair value unless:

(a) the exchange transaction lacks commercial substance; or

(b) the fair value of neither the asset received nor the asset given up is

reliably measurable.

Elements of cost

Purchase Costs

Purchase price, including import duties

and non-refundable purchase taxes, after

deduction of trade discounts and rebates

Directly attributable and necessary costs

Directly attributable costs to bring the asset

to the location and condition necessary for

it to be capable of operating in the manner

intended by management

Costs of dismantling and restoration

The initial estimate of the costs of dismantling and removing the item and restoring the sale

on which PPE is located.


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The acquired item is measured in this manner even if an enterprise cannot

immediately derecognise the asset given up. If the acquired item is not

measured at fair value, its/their cost is measured at the carrying amount of

the asset given up.

Measurement after recognition

An entity should choose either the cost model or the revaluation model as its

accounting policy and shall apply that policy to an entire class of property,

plant and equipment.

If an asset’s carrying amount is increased as a result of a revaluation,

the increase shall be recognised in other comprehensive income and

accumulated in equity under the heading of revaluation surplus.

Subsequent Costs

Costs of day-to-day servicing

These are primarily the costs of labour and

consumables and may include the cost of small parts. Not recognised

as PPE

Replacement Cost

The cost of replacing part is recognised in the

carrying amount of PPE if the recognition criteria are met. The carrying amount

of the replaced parts is derecognised

Regular Major Inspection Cost

It is recognised in the carrying amount of the PPE

if the recognition criteria are met.

Any remaining carrying amount of the cost of the

previous inspection is derecognised.

Cost Model

Cost less any accumulated depreciation and any

accumulated impairment losses

Revaluation Model

Whose fair value can be measured reliably should be carried at a revalued amount less

any subsequent accumulated depreciation and subsequent accumulated impairment losses

With sufficient regularity

For entire class of PPE to which an asset which is revalued belongs


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However, the increase shall be recognised in profit or loss to the

extent that it reverses a revaluation decrease of the same asset

previously recognised in profit or loss.

If an asset’s carrying amount is decreased as a result of a revaluation,

the decrease shall be recognised in profit or loss.

However, the decrease shall be recognised in other comprehensive

income to the extent of any credit balance existing in the revaluation

surplus in respect of that asset. The decrease recognised in other

comprehensive income reduces the amount accumulated in equity

under the heading of revaluation surplus.

Depreciation

Each part of an item of property, plant and equipment with a cost that is

significant in relation to the total cost of the item should be depreciated

separately. The depreciation charge for each period should be recognised in

profit or loss unless it is included in the carrying amount of another asset.

The depreciable amount of an asset should be allocated on a systematic

basis over its useful life.

The residual value and the useful life of an asset should be reviewed at least

at each financial year-end and, if expectations differ from previous estimates,

the change(s) should be accounted for as a change in an accounting

estimate in accordance with Ind AS 8, Accounting Policies, Changes in

Accounting Estimates and Errors.

Impairment

To determine whether an item of property, plant and equipment is impaired,

an entity should apply Ind AS 36, Impairment of Assets.

Derecognition

The carrying amount of an item of property, plant and equipment should be

derecognised:

a) on disposal; or

b) when no future economic benefits are expected from its use or

disposal.


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Appendix B to Ind AS 16 provides guidance for recognition of production

stripping costs as an asset; initial measurement of the stripping activity

asset; and subsequent measurement of the stripping activity asset. An entity

shall recognise a stripping activity asset if, and only if, (a) it is probable that

the future economic benefit (improved access to the ore body) associated

with the stripping activity will flow to the entity; (b) the entity can identify the

component of the ore body for which access has been improved; and (c) the

costs relating to the stripping activity associated with that component can be

measured reliably. The entity shall initially measure the stripping activity

asset at cost. After initial recognition, the stripping activity asset shall be

carried at either its cost or its revalued amount less depreciation or

amortisation and less impairment losses, in the same way as the existing

asset of which it is a part.


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Ind AS 19, Employee Benefits The objective of this Standard is to prescribe the accounting and disclosure

for employee benefits. The Standard requires an entity to recognise:

(a) a liability when an employee has provided service in exchange for

employee benefits to be paid in the future; and

(b) an expense when the entity consumes the economic benefit arising

from service provided by an employee in exchange for employee

benefits.

Employee benefits are all forms of considerations given by an entity

in exchange for service rendered by employees or for the

termination of employment.

Employee benefits include:

Short-term employee benefits

Short-term employee benefits are employee benefits (other than

termination benefits) that are expected to be settled wholly before

twelve months after the end of the annual reporting period in which

the employees render the related service.

Short-term employee benefits include items such as the following, if expected

to be settled wholly before twelve months after the end of the annual

reporting period in which the employees render the related services:

a) wages, salaries and social security contributions;

b) paid annual leave and paid sick leave;

c) profit-sharing and bonuses; and

d) non-monetary benefits (such as medical care, housing, cars and free

or subsidised goods or services) for current employees.

Short-term employee benefits

Post-employment benefits

Other long-term employee

benefits

Termination benefits


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When an employee has rendered service to an entity during an accounting

period, the entity should recognise the undiscounted amount of short-term

employee benefits expected to be paid in exchange for that service:

a) as a liability (accrued expense), after deducting any amount already

paid. If the amount already paid exceeds the undiscounted amount of

the benefits, an entity should recognise that excess as an asset

(prepaid expense) to the extent that the prepayment will lead to, for

example, a reduction in future payments or cash refund.

b) as an expense, unless another Ind AS requires or permits the inclusion

of the benefits in the cost of an asset.

Post-employment benefits

Post-employment benefits are employee benefits (other than

termination benefits and short-term employee benefits) that are

payable after the completion of employment.

Post-employment benefits include items such as the following:

(a) retirement benefits (eg pensions and lump sum payments on

retirement); and

(b) other post-employment benefits, such as post-employment life

insurance and post-employment medical care.

Defined contribution plan

Defined contribution plans are post-employment benefit plans

under which an entity pays fixed contributions into a separate

entity (a fund) and will have no legal or constructive obligation to

pay further contributions if the fund does not hold sufficient assets

to pay all employee benefits relating to employee service in the

current and prior periods.

Post-employment benefit plan

Defined Contribution plan

Defined Benefits plan


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Under defined contribution plans the entity’s legal or constructive obligation

is limited to the amount that it agrees to contribute to the fund. The amount of

the post-employment benefits received by the employee is determined by the

amount of contributions paid by an entity (and perhaps also the employee) to

a post-employment benefit plan or to an insurance company, together with

investment returns arising from the contributions. In consequence, actuarial

risk (that benefits will be less than expected) and investment risk (that assets

invested will be insufficient to meet expected benefits) fall, in substance, on

the employee.

When an employee has rendered service to an entity during a period, the

entity should recognise the contribution payable to a defined contribution

plan in exchange for that service:

(a) as a liability (accrued expense), after deducting any contribution

already paid. If the contribution already paid exceeds the contribution

due for service before the end of the reporting period, an entity should

recognise that excess as an asset (prepaid expense) to the extent that

the prepayment will lead to, for example, a reduction in future

payments or cash refund.

(b) as an expense, unless another Ind AS requires or permits the inclusion

of the contribution in the cost of an asset.

Defined benefits plan

Defined benefit plans are post-employment benefit plans other than

defined contribution plans.

Under defined benefit plans:

a) the entity’s obligation is to provide the agreed benefits to current and

former employees; and

b) actuarial risk (that benefits will cost more than expected) and

investment risk fall, in substance, on the entity. If actuarial or

investment experience are worse than expected, the entity’s obligation

may be increased.

Accounting by an entity for defined benefit plans involves the following steps:

a) determining the deficit or surplus. This involves:


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i. using an actuarial technique to make a reliable estimate of the

ultimate cost to the entity of the benefit that employees have

earned in return for their service in the current and prior periods.

ii. discounting that benefit to determine the present value of the

defined benefit obligation and the current service cost.

iii. deducting the fair value of any plan assets from the present value

of the defined benefit obligation.

b) determining the amount of the net defined benefit liability (asset) as

the amount of the deficit or surplus adjusted for any effect of limiting a

net defined benefit asset to the asset ceiling.

c) determining amounts to be recognised in profit or loss:

i. current service cost.

ii. any past service cost and gain or loss on settlement.

iii. net interest on the net defined benefit liability (asset).

d) determining the remeasurements of the net defined benefit liability

(asset), to be recognised in other comprehensive income, comprising:

i. actuarial gains and losses;

ii. return on plan assets, excluding amounts included in net interest

on the net defined benefit liability (asset); and

iii. any change in the effect of the asset ceiling, excluding amounts

included in net interest on the net defined benefit liability (asset).

An entity shall determine the net defined benefit liability (asset) with sufficient

regularity that the amounts recognised in the financial statements do not

differ materially from the amounts that would be determined at the end of the

reporting period.

Accounting for constructive obligation

An entity shall account not only for its legal obligation under the formal terms

of a defined benefit plan, but also for any constructive obligation that arises

from the entity’s informal practices. Informal practices give rise to a

constructive obligation where the entity has no realistic alternative but to pay

employee benefits. An example of a constructive obligation is where a

change in the entity’s informal practices would cause unacceptable damage

to its relationship with employees.


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Multi-employer plan

Multi-employer plans are defined contribution plans (other than state plans) or defined benefit plans (other than state plans) that:

(a) pool the assets contributed by various entities that are not

under common control; and

(b) use those assets to provide benefits to employees of more than

one entity, on the basis that contribution and benefit levels are

determined without regard to the identity of the entity that

employs the employees.

An entity should classify a multi-employer plan as a defined contribution plan

or a defined benefit plan under the terms of the plan (including any

constructive obligation that goes beyond the formal terms).

Other long-term employee benefits

Other long-term employee benefits are all employee benefits other than short-term employee benefits, post-employment benefits and termination benefits.

Other long-term employee benefits include items such as the following, if not

expected to be settled wholly before twelve months after the end of the

annual reporting period in which the employees render the related service:

a) long-term paid absences such as long-service or sabbatical leave;

b) jubilee or other long-service benefits;

c) long-term disability benefits;

d) profit-sharing and bonuses; and

e) deferred remuneration.

The Standard does not require the measurement of other long-term

employee benefits to the same degree of uncertainty as the measurement of

post-employment benefits. The Standard requires a simplified method of

accounting for other long-term employee benefits. Unlike the accounting

required for post-employment benefits, this method does not recognise re-

measurements in other comprehensive income.


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Termination benefits

Termination benefits are employee benefits provided in exchange for the termination of an employee’s employment as a result of either:

(a) an entity’s decision to terminate an employee’s employment

before the normal retirement date; or

(b) an employee’s decision to accept an offer of benefits in

exchange for the termination of employment.

An entity should recognise a liability and expense for termination benefits at

the earlier of the following dates:

a) when the entity can no longer withdraw the offer of those benefits; and

b) when the entity recognises costs for a restructuring that is within the

scope of Ind AS 37 and involves the payment of termination benefits.

An entity should measure termination benefits on initial recognition, and

should measure and recognise subsequent changes, in accordance with the

nature of the employee benefit, provided that if the termination benefits are

an enhancement to post-employment benefits, the entity should apply the

requirements for post-employment benefits. Otherwise:

a) if the termination benefits are expected to be settled wholly before

twelve months after the end of the annual reporting period in which the

termination benefit is recognised, the entity should apply the

requirements for short-term employee benefits.

b) if the termination benefits are not expected to be settled wholly before

twelve months after the end of the annual reporting period, the entity

should apply the requirements for other long-term employee benefits.


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Ind AS 20, Accounting for Government Grants and Disclosure of Government Assistance The objective of this Standard is to provide for accounting of, and the

disclosures of, government grants and also the disclosure of other forms of

government assistance.

Government grants

Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity.

They exclude those forms of government assistance which cannot reasonably have a value placed upon them and transactions with government which cannot be distinguished from the normal trading transactions of the entity.

Government grants, including non-monetary grants at fair value, shall not be

recognised until there is reasonable assurance that:

a) the entity will comply with the conditions attaching to them; and

b) the grants will be received.

Government grants shall be recognised in profit or loss on a systematic basis

over the periods in which the entity recognises as expenses the related costs

for which the grants are intended to compensate.

There are two broad approaches to the accounting for government grants:

a) the capital approach, under which a grant is recognised outside profit

or loss, and

b) the income approach, under which a grant is recognised in profit or

loss over one or more periods.

A government grant that becomes receivable as compensation for expenses

or losses already incurred or for the purpose of giving immediate financial

support to the entity with no future related costs shall be recognised in profit

or loss of the period in which it becomes receivable.


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Non-monetary government grants

A Government grant may take the form of a transfer of a non-monetary asset,

such as land or other resources, for the use of the entity. In these

circumstances, it is usual to assess the fair value of the non-monetary asset

and to account for both grant and asset at that fair value. An alternative

course that is sometimes followed is to record both asset and grant at a

nominal amount.

Government grants related to assets

Grants related to assets are government grants whose primary condition is

that an entity qualifying for them should purchase, construct or otherwise

acquire long-term assets. Subsidiary conditions may also be attached

restricting the type or location of the assets or the periods during which they

are to be acquired or held.

Government grants related to assets, including non-monetary grants at fair

value, shall be presented in the balance sheet either by setting up the grant

as deferred income or by deducting the grant in arriving at the carrying

amount of the asset.

Two methods of presentation in financial statements of grants or the

appropriate portions of grants related to assets are regarded as acceptable

alternatives.

a) One method recognises the grant as deferred income that is

recognised in profit or loss on a systematic basis over the useful life of

the asset.

b) The other method deducts the grant in calculating the carrying amount

of the asset. The grant is recognised in profit or loss over the life of a

depreciable asset as a reduced depreciation expense.

Government grants related to income

Grants related to income shall be presented as part of profit or loss, either

separately or under a general heading such as ‘Other income’; alternatively,

they can be deducted in reporting the related expense.


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Repayment of government grants

A Government grant that becomes repayable shall be accounted for as

a change in accounting estimate as per Ind AS 8, Accounting Policies,

Changes in Accounting Estimates and Errors.

Repayment of a grant related to income shall be applied first against

any unamortised deferred credit recognised in respect of the grant.

To the extent that the repayment exceeds any such deferred credit, or

when no deferred credit exists, the repayment shall be recognised

immediately in profit or loss.

Repayment of a grant related to an asset shall be recognised by

increasing the Ind AS 20, Accounting for Government Grants and

Disclosure of Government Assistance carrying amount of the asset or

reducing the deferred income balance by the amount repayable.

The cumulative additional depreciation that would have been

recognised in profit or loss to date in the absence of the grant shall be

recognised immediately in profit or loss.

Government Assistance

Government assistance is action by government designed to provide an

economic benefit specific to an entity or range of entities qualifying under

certain criteria. Government assistance for the purpose of this Standard

does not include benefits provided only indirectly through action affecting

general trading conditions, such as the provision of infrastructure in

development areas or the imposition of trading constraints on competitors.

The following matters shall be disclosed:

(a) the accounting policy adopted for government grants, including the

methods of presentation adopted in the financial statements;

(b) the nature and extent of government grants recognised in the financial

statements and an indication of other forms of government assistance

from which the entity has directly benefited; and

(c) unfulfilled conditions and other contingencies attaching to government

assistance that has been recognised.


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Appendix A of Ind AS 20 address the issue that whether government

assistance is a government grant within the scope of Ind AS 20 and,

therefore, should be accounted for in accordance within the Standard. The

Appendix prescribes that government assistance to entities meets the

definition of government grants in Ind AS 20, even if there are no conditions

specifically relating to the operating activities of the entity other than the

requirement to operate in certain regions or industry sectors. The Appendix

provides that such grants shall not be credited directly to shareholders’

interests.


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Ind AS 21, The Effects of Changes in Foreign Exchange Rates An entity may carry on foreign activities in two ways. It may have

transactions in foreign currencies or it may have foreign operations.

In addition, an entity may present its financial statements in a foreign

currency. The objective of this Standard is to prescribe how to include foreign

currency transactions and foreign operations in the financial statements of an

entity and how to translate financial statements into a presentation currency.

The principal issues are which exchange rate(s) to use and how to report the

effects of changes in exchange rates in the financial statements.

Functional Currency

Functional currency is the currency of the primary economic environment

in which the entity operates.

The primary economic environment in which an entity operates is normally

the one in which it primarily generates and expends cash. An entity considers

the following factors in determining its functional currency:

a) the currency:

i. that mainly influences sales prices for goods and services (this

will often be the currency in which sales prices for its goods and

services are denominated and settled); and

ii. of the country whose competitive forces and regulations mainly

determine the sales prices of its goods and services.

b) the currency that mainly influences labour, material and other costs of

providing goods or services (this will often be the currency in which

such costs are denominated and settled).

Exchange difference is the difference resulting from translating a given

number of units of one currency into another currency at different exchange

rates.

Foreign currency is a currency other than the functional currency of the

entity.


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An entity’s functional currency reflects the underlying transactions, events

and conditions that are relevant to it. Accordingly, once determined, the

functional currency is not changed unless there is a change in those

underlying transactions, events and conditions.

Reporting foreign currency transactions in functional currency

A foreign currency transaction shall be recorded, on initial recognition in the

functional currency, by applying to the foreign currency amount the spot

exchange rate between the functional currency and the foreign currency at

the date of the transaction.

At the end of each reporting period:

a) foreign currency monetary items shall be translated using the closing

rate;

b) non-monetary items that are measured in terms of historical cost in a

foreign currency shall be translated using the exchange rate at the

date of the transaction; and

c) non-monetary items that are measured at fair value in a foreign

currency shall be translated using the exchange rates at the date when

the fair value was measured.

Exchange differences arising on the settlement of monetary items or on

translating monetary items at rates different from those at which they were

translated on initial recognition during the period or in previous financial

statements shall be recognised in profit or loss in the period in which they

arise.

When a gain or loss on a non-monetary item is recognised in other

comprehensive income, any exchange component of that gain or loss shall

be recognised in other comprehensive income. Conversely, when a gain or

loss on a non-monetary item is recognised in profit or loss, any exchange

component of that gain or loss shall be recognised in profit or loss.

Exchange differences arising on a monetary item that forms part of a

reporting entity’s net investment in a foreign operation shall be recognised in

profit or loss in the separate financial statements of the reporting entity or the

individual financial statements of the foreign operation, as appropriate. In the

financial statements that include the foreign operation and the reporting


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entity (eg consolidated financial statements when the foreign operation is a

subsidiary), such exchange differences shall be recognised initially in other

comprehensive income and reclassified from equity to profit or loss on

disposal of the net investment.

Presentation Currency

Presentation currency is the currency in which the financial statements are

presented.

An entity may present its financial statements in any currency (or currencies).

If the presentation currency differs from the entity’s functional currency, it

translates its results and financial position into the presentation currency.

The results and financial position of an entity whose functional currency is

not the currency of a hyperinflationary economy shall be translated into a

different presentation currency using the following procedures:

a) assets and liabilities for each balance sheet presented (ie including

comparatives) shall be translated at the closing rate at the date of that

balance sheet;

b) income and expenses for each statement of profit and loss presented

(i.e. including comparatives) shall be translated at exchange rates at

the dates of the transactions; and

c) all resulting exchange differences shall be recognised in other

comprehensive income.

The results and financial position of an entity whose functional currency is

the currency of a hyperinflationary economy shall be translated into a

different presentation currency using the following procedures:

a) all amounts (i.e. assets, liabilities, equity items, income and expenses,

including comparatives) shall be translated at the closing rate at the

date of the most recent balance sheet, except that.

b) when amounts are translated into the currency of a non-

hyperinflationary economy, comparative amounts shall be those that

were presented as current year amounts in the relevant prior year

financial statements (i.e. not adjusted for subsequent changes in the

price level or subsequent changes in exchange rates).


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Translation of foreign operation

The incorporation of the results and financial position of a foreign operation

with those of the reporting entity follows normal consolidation procedures,

such as the elimination of intragroup balances and intragroup transactions of

a subsidiary.

However, an intragroup monetary asset (or liability), whether short-term or

long-term, cannot be eliminated against the corresponding intragroup liability

(or asset) without showing the results of currency fluctuations in the

consolidated financial statements. This is because the monetary item

represents a commitment to convert one currency into another and exposes

the reporting entity to a gain or loss through currency fluctuations.

Disposal or partial disposal of a foreign operation

On the disposal of a foreign operation, the cumulative amount of the

exchange differences relating to that foreign operation, recognised in other

comprehensive income and accumulated in the separate component of

equity, shall be reclassified from equity to profit or loss (as a reclassification

adjustment) when the gain or loss on disposal is recognised.

On disposal of a subsidiary that includes a foreign operation, the cumulative

amount of the exchange differences relating to that foreign operation that

have been attributed to the non-controlling interests shall be derecognised,

but shall not be reclassified to profit or loss.

On the partial disposal of a subsidiary that includes a foreign operation, the

entity shall re-attribute the proportionate share of the cumulative amount of

the exchange differences recognised in other comprehensive income to the

non-controlling interests in that foreign operation. In any other partial

disposal of a foreign operation the entity shall reclassify to profit or loss only

the proportionate share of the cumulative amount of the exchange

differences recognised in other comprehensive income.

Appendix B of Ind AS 21 addresses how to determine the date of the

transaction for the purpose of determining the exchange rate to use on initial

recognition of the related asset, expense or income (or part of it) on the

derecognition of a non-monetary asset or non-monetary liability arising from

the payment or receipt of advance consideration in a foreign currency.


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The date of the transaction for the purpose of determining the exchange rate

to use on initial recognition of the related asset, expense or income (or part

of it) is the date on which an entity initially recognises the non-monetary

asset or non-monetary liability arising from the payment or receipt of advance

consideration. If there are multiple payments or receipts in advance, the

entity shall determine a date of the transaction for each payment or receipt of

advance consideration.


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Ind AS 23, Borrowing Costs

Borrowing costs are interest and other costs that an entity incurs in

connection with the borrowing of funds.

A qualifying asset is an asset that necessarily takes a substantial period of

time to get ready for its intended use or sale.

Recognition

An entity shall capitalise borrowing costs that are directly attributable to the

acquisition, construction or production of a qualifying asset as part of the

cost of that asset. An entity shall recognise other borrowing costs as an

expense in the period in which it incurs them.

Borrowing costs that are directly attributable to the acquisition, construction

or production of a qualifying asset shall be included in the cost of that asset.

Such borrowing costs shall be capitalised as part of the cost of the asset

when it is probable that they will result in future economic benefits to the

entity and the costs can be measured reliably.

Specific Borrowings -The borrowing costs eligible for capitalisation are the

actual borrowing costs incurred on that borrowing during the period reduced by

any investment income on the temporary investment of those borrowings.

General Borrowings -The entity shall determine the amount of borrowing costs

eligible for capitalisation by applying a capitalisation rate to the expenditures on

that asset.

The capitalisation rate shall be the weighted average of the borrowing costs

applicable to all borrowings of the entity that are outstanding during the period.

However, an entity shall exclude from this calculation borrowing costs applicable

to borrowings made specifically for the purpose of obtaining a qualifying asset

until substantially all the activities necessary to prepare that asset for its intended

use or sale are complete. The amount of borrowing costs that an entity

capitalises during a period shall not exceed the amount of borrowing costs it

incurred during that period.

Commencement of capitalisation

An entity shall begin capitalising borrowing costs as part of the cost of a

qualifying asset on the commencement date. The commencement date for


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capitalisation is the date when the entity first meets all of the following

conditions:

a) it incurs expenditures for the asset;

b) it incurs borrowing costs; and

c) it undertakes activities that are necessary to prepare the asset for its

intended use or sale.

Suspension of capitalisation

An entity shall suspend capitalisation of borrowing costs during extended

periods in which it suspends active development of a qualifying asset.

Cessation of capitalisation

An entity shall cease capitalising borrowing costs when substantially all the

activities necessary to prepare the qualifying asset for its intended use or

sale are complete.

Disclosure

An entity shall disclose the amount of borrowing costs capitalised during the

period and the capitalisation rate used to determine the amount of borrowing

costs eligible for capitalisation.


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Ind AS 24, Related Party Disclosures The objective of this Standard is to ensure that an entity’s financial

statements contain the disclosures necessary to draw attention to the

possibility that its financial position and profit or loss may have been affected

by the existence of related parties and by transactions and outstanding

balances, including commitments, with such parties.

This standard shall be applied in:

a) identifying related party relationships and transactions;

b) identifying outstanding balances, including commitments, between an

entity and its related parties;

c) identifying the circumstances in which disclosure of the items in (a)

and (b) is required; and

d) determining the disclosures to be made about those items.

Further this Standard also requires disclosure of related party relationships,

transactions and outstanding balances, including commitments, in the

consolidated and separate financial statements of a parent or investors with

joint control of, or significant influence over, an investee. This Standard also

applies to individual financial statements.

Intragroup related party transactions and outstanding balances are

eliminated, except for those between an investment entity and its

subsidiaries measured at fair value through profit or loss, in the preparation

of consolidated financial statements of the group.

Related party disclosure requirements as laid down in this Standard do not

apply in circumstances where providing such disclosures would conflict with

the reporting entity’s duties of confidentiality as specifically required in terms

of a statute or by any regulator or similar competent authority.

In case a statute or a regulator or a similar competent authority governing an

entity prohibits the entity to disclose certain information which is required to

be disclosed as per this Standard, disclosure of such information is not

warranted. For example, banks are obliged by law to maintain confidentiality

in respect of their customers’ transactions and this Standard would not

override the obligation to preserve the confidentiality of customers’ dealings.


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A related party is a person or entity that is related to the entity that is

preparing its financial statements (referred to as the ‘reporting entity’).

A person or a close member of that person’s family is related to a reporting

entity if that person:

i) has control or joint control of the reporting entity;

ii) has significant influence over the reporting entity; or

iii) is a member of the key management personnel of the reporting entity

or of a parent of the reporting entity.

An entity is related to a reporting entity if any of the following conditions

applies:

(i) The entity and the reporting entity are members of the same group

(which means that each parent, subsidiary and fellow subsidiary is

related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an

associate or joint venture of a member of a group of which the other

entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an

associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of

employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the

sponsoring employers are also related to the reporting entity.

(vi) The entity is controlled or jointly controlled by a person identified in

(a).

(vii) A person identified in (a)(i) has significant influence over the entity or

is a member of the key management personnel of the entity (or of a

parent of the entity).

(viii) The entity, or any member of a group of which it is a part, provides key

management personnel services to the reporting entity or to the parent

of the reporting entity.


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In the definition of a related party, an associate includes subsidiaries of the

associate and a joint venture includes subsidiaries of the joint venture.

Therefore, for example, an associate’s subsidiary and the investor that has

significant influence over the associate are related to each other.

Additionally, ‘compensation’, ‘government’ and ‘government-related entity’

are all defined in the Standard

A related party transaction is a transfer of resources, services or

obligations between a reporting entity and a related party, regardless

of whether a price is charged.

Close members of the family of a person are those family members

who may be expected to influence, or be influenced by, that person in

their dealings with the entity including:

a) that person’s children, spouse or domestic partner, brother,

sister, father and mother;

b) children of that person’s spouse or domestic partner; and

c) dependants of that person or that person’s spouse or domestic

partner.

Key management personnel are those persons having authority and

responsibility for planning, directing and controlling the activities of the

entity, directly or indirectly, including any director (whether executive

or otherwise) of that entity.

In the context of this Standard, the following are not related parties:

a) two entities simply because they have a director or other member of

key management personnel in common or because a member of key

management personnel of one entity has significant influence over the

other entity.

b) two joint venturers simply because they share joint control of a joint

venture.

c) providers of finance, trade unions, public utilities, and departments and

agencies of a government that does not control, jointly control or

significantly influence the reporting entity, simply by virtue of their

normal dealings with an entity (even though they may affect the

freedom of action of an entity or participate in its decision-making

process).


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d) a customer, supplier, franchisor, distributor or general agent with

whom an entity transacts a significant volume of business, simply by

virtue of the resulting economic dependence.

Disclosures for all entities

Relationships between a parent and its subsidiaries shall be disclosed

irrespective of whether there have been transactions between them. An

entity should disclose the name of its parent and, if different, the ultimate

controlling party. If neither the entity’s parent nor the ultimate controlling

party produces consolidated financial statements available for public use, the

name of the next most senior parent that does so shall also be disclosed.

Unless an entity obtains key management personnel services from another

entity (the ‘management entity’), it shall disclose key management personnel

compensation in total and for each of the following categories:

a) short-term employee benefits;

b) post-employment benefits;

c) other long-term benefits;

d) termination benefits; and

e) share-based payment.

If an entity has had related party transactions during the periods covered by

the financial statements, it shall disclose the nature of the related party

relationship as well as information about those transactions and outstanding

balances, including commitments, necessary for users to understand the

potential effect of the relationship on the financial statements. At a minimum,

disclosures shall include:

a. the amount of the transactions;

b. the amount of outstanding balances, including commitments, and:

i. their terms and conditions, including whether they are secured,

and the nature of the consideration to be provided in settlement;

and

ii. details of any guarantees given or received;

c. provisions for doubtful debts related to the amount of outstanding

balances; and


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d. the expense recognised during the period in respect of bad or doubtful

debts due from related parties.

The above disclosures shall be made separately for each of the following

categories:

a) the parent;

b) entities with joint control of, or significant influence over, the entity;

c) subsidiaries;

d) associates;

e) joint ventures in which the entity is a joint venturer;

f) key management personnel of the entity or its parent; and

g) other related parties.

Amounts incurred by the entity for the provision of key management

personnel services that are provided by a separate management entity shall

be disclosed.

Items of a similar nature may be disclosed in aggregate except when

separate disclosure is necessary for an understanding of the effects of

related party transactions on the financial statements of the entity.

Disclosures for government-related entities

A government-related reporting entity is exempt from the disclosure

requirements of related party transactions and outstanding balances,

including commitments, with:

a) a government that has control or joint control of, or significant

influence over, the reporting entity; and

b) another entity that is a related party because the same government

has control or joint control of, or significant influence over, both the

reporting entity and the other entity.

If a reporting entity applies the above exemption, it should disclose the

following about the transactions and related outstanding balances:

a) the name of the government and the nature of its relationship with the

reporting entity (i.e. control, joint control or significant influence);


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b) the following information in sufficient detail to enable users of the

entity’s financial statements to understand the effect of related party

transactions on its financial statements:

i. the nature and amount of each individually significant

transaction; and

ii. for other transactions that are collectively, but not individually,

significant, a qualitative or quantitative indication of their extent.


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Ind AS 27, Separate Financial Statements The objective of this Standard is to prescribe the accounting and disclosure

requirements for investments in subsidiaries, joint ventures and associates

when an entity prepares separate financial statements. The Standard shall

be applied in accounting for investments in subsidiaries, joint ventures and

associates when an entity elects, or is required by law, to present separate

financial statements.

Separate financial statements are those presented by a parent (i.e. an

investor with control of a subsidiary) or an investor with joint control of, or

significant influence over, an investee, in which the investments are

accounted for at cost or in accordance with Ind AS 109, Financial

Instruments.

Separate financial statements are those presented in addition to consolidated

financial statements or in addition to financial statements in which

investments in associates or joint ventures are accounted for using the equity

method, other than in the following circumstances:

• an entity may present separate financial statements as its only

financial statements, if it is exempted from consolidation or from

applying equity method of accounting;

• an investment entity shall present separate financial statements as its

only financial statements, if it is required, throughout the current period

and all comparative periods, to apply the exception to consolidation for

all of its subsidiaries.

Preparation of separate financial statements

When an entity prepares separate financial statements, it shall account for

investments in subsidiaries, joint ventures and associates either:

(a) at cost, or

(b) in accordance with Ind AS 109.

The entity shall apply the same accounting for each category of investments.

Investments accounted for at cost shall be accounted for in accordance with

Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations,

when they are classified as held for sale (or included in a disposal group that


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is classified as held for sale). The measurement of investments accounted

for in accordance with Ind AS 109 is not changed in such circumstances.

If an entity elects to measure its investments in associates or joint ventures

at fair value through profit or loss in accordance with Ind AS 109, it shall also

account for those investments in the same way in its separate financial

statements.

If a parent is required, in accordance with Ind AS 110, to measure its

investment in a subsidiary at fair value through profit or loss in accordance

with Ind AS 109, it shall also account for its investment in a subsidiary in the

same way in its separate financial statements.

An entity shall recognise a dividend from a subsidiary, a joint venture or an

associate in profit or loss in its separate financial statements when its right to

receive the dividend is established.

Disclosure

An entity shall apply all applicable Ind ASs when providing disclosures in its

separate financial statements, including the specific disclosures as required

by this Standard.


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Ind AS 28, Investments in Associates and Joint Ventures The Standard sets out the requirements for the application of the equity

method when accounting for investments in associates and joint ventures.

The Standard shall be applied by all entities that are investors with joint

control of, or significant influence over, an investee.

An associate is an entity over which the investor has significant influence.

Significant influence is the power to participate in the financial and

operating policy decisions of the investee but is not control or joint control of

those policies.

If an entity holds, directly or indirectly through intermediary (eg subsidiaries),

20 per cent or more of the voting power of the investee, it is presumed that

the entity has significant influence, unless it can be clearly demonstrated that

this is not the case. Conversely, if the entity holds, directly or indirectly

through intermediary (eg subsidiaries), less than 20 per cent of the voting

power of the investee, it is presumed that the entity does not have significant

influence, unless such influence can be clearly demonstrated. A substantial

or majority ownership by another investor does not necessarily preclude an

entity from having significant influence.

The existence of significant influence by an entity is usually evidenced in one

or more of the following ways:

(a) representation on the board of directors or equivalent governing body

of the investee;

(b) participation in policy-making processes, including participation in

decisions about dividends or other distributions;

(c) material transactions between the entity and its investee;

(d) interchange of managerial personnel; or

(e) provision of essential technical information.

The existence and effect of potential voting rights that are currently

exercisable or convertible, including potential voting rights held by other

entities, are considered when assessing whether an entity has significant

influence.


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The equity method is a method of accounting whereby the investment is

initially recognised at cost and adjusted thereafter for the post-acquisition

change in the investor’s share of the investee’s net assets. The investor’s

profit or loss includes its share of the investee’s profit or loss and the

investor’s other comprehensive income includes its share of the investee’s

other comprehensive income.

Equity method

The investment in an associate or a joint venture upon acquisition is

recognised at cost.

On acquisition of the investment, any difference between the cost of

the investment and the entity’s share of the net fair value of the

investee’s identifiable assets and liabilities is accounted for as - (a)

Goodwill relating to an associate or a joint venture is included in the

carrying amount of the investment. Amortisation of that goodwill is not

permitted. (b) Any excess of the entity’s share of the net fair value of

the investee’s identifiable assets and liabilities over the cost of the

investment is recognised directly in equity as capital reserve in the

period in which the investment is acquired.

The carrying amount is increased or decreased to recognise the

investor’s share of the profit or loss of the investee after the date of

acquisition. Appropriate adjustments to the entity’s share of the

associate’s or joint venture’s profit or loss after acquisition are made in

order to account, for example, for depreciation of the depreciable

assets based on their fair values at the acquisition date. Unrealised

profits and losses on transactions with associates are eliminated to the

extent of the investor’s interest in the investee.

The investor’s share of the investee’s profit or loss is recognised in the

investor’s profit or loss.

Distributions received from an investee reduce the carrying amount of

the investment.

The investor’s share of proportionate interest in the investee arising

from changes in the investee’s other comprehensive income are

recognised in the investor’s other comprehensive income.


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An entity with joint control of, or significant influence over, an investee shall

account for its investment in an associate or a joint venture using the equity

method except when that investment qualifies for exemption.

Ind AS 109, Financial Instruments, does not apply to interests in associates

and joint ventures that are accounted for using the equity method. When

instruments containing potential voting rights in substance currently give

access to the returns associated with an ownership interest in an associate

or a joint venture, the instruments are not subject to Ind AS 109. In all other

cases, instruments containing potential voting rights in an associate or a joint

venture are accounted for in accordance with Ind AS 109. An entity also

applies Ind AS 109 to other financial instruments in an associate or joint

venture to which the equity method is not applied.

When an investment in an associate or a joint venture is held by, or is held

indirectly through, an entity that is a venture capital organisation, or a mutual

fund, unit trust and similar entities including investment-linked insurance

funds, the entity may elect to measure that investment at fair value through

profit or loss in accordance with Ind AS 109. An entity shall make this

election separately for each associate or joint venture, at initial recognition of

the associate or joint venture.

The Standard provides exemptions from applying the equity method similar

to those provided in Ind AS 110, Consolidated Financial Statements to the

parent that is exempted to prepare consolidated financial statements.

An entity shall apply Ind AS 105 to an investment, or a portion of an

investment, in an associate or a joint venture that meets the criteria to be

classified as held for sale. The entity’s financial statements shall be prepared

using uniform accounting policies for like transactions and events in similar

circumstances unless, in case of an associate, it is impracticable to do so. If

an associate or a joint venture uses accounting policies other than those of

the entity for like transactions and events in similar circumstances,

adjustments shall be made to make the associate’s or joint venture’s

accounting policies conform to those of the entity when the associate’s or

joint venture’s financial statements are used by the entity in applying the

equity method. However, if an entity that is not itself an investment entity has

an interest in an associate or joint venture that is an investment entity, the

entity may, when applying the equity method, retain the fair value

measurement applied by that investment entity associate or joint venture to


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the investment entity associate’s or joint venture’s interests in subsidiaries’.

This election is made separately for each investment entity associate or joint

venture, at the later of the date on which (a) the investment entity associate

or joint venture is initially recognised; (b) the associate or joint venture

becomes an investment entity; and (c) the investment entity associate or joint

venture first becomes a parent.

After application of the equity method, including recognising the associate’s

or joint venture’s losses, the entity applies the requirements of Ind AS 109 to

determine whether it is necessary to recognise any additional impairment

loss with respect to its net investment in the associate or joint venture.

An entity loses significant influence over an investee when it loses the power

to participate in the financial and operating policy decisions of that investee.

The loss of significant influence can occur with or without a change in

absolute or relative ownership levels. On the loss of significant influence or

joint control, the gain or loss is recognised in profit or loss. The entity shall

account for all amounts previously recognised in other comprehensive

income in relation to that investment on the same basis as would have been

required if the investee had directly disposed of the related assets or

liabilities.


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Ind AS 29, Financial Reporting in Hyperinflationary Economies In a hyperinflationary economy, reporting of operating results and financial

position in the local currency without restatement is not useful. Money loses

purchasing power at such a rate that comparison of amounts from

transactions and other events that have occurred at different times, even

within the same accounting period, is misleading.

Ind AS 29 shall be applied to the financial statements, including the

consolidated financial statements, of any entity whose functional currency is

the currency of a hyperinflationary economy.

The Standard does not establish an absolute rate at which hyperinflation is

deemed to arise. It is a matter of judgement when restatement of financial

statements in accordance with this Standard becomes necessary.

Hyperinflation is indicated by characteristics of the economic environment of

a country which include, but are not limited to, the following:

(a) the general population prefers to keep its wealth in non-monetary

assets or in a relatively stable foreign currency. Amounts of local

currency held are immediately invested to maintain purchasing power;

(b) the general population regards monetary amounts not in terms of the

local currency but in terms of a relatively stable foreign currency.

Prices may be quoted in that currency;

(c) sales and purchases on credit take place at prices that compensate for

the expected loss of purchasing power during the credit period, even if

the period is short;

(d) interest rates, wages and prices are linked to a price index; and

(e) the cumulative inflation rate over three years is approaching, or

exceeds, 100%.

Restatement of financial statements

The financial statements of an entity whose functional currency is the

currency of a hyperinflationary economy, whether they are based on a

historical cost approach or a current cost approach, they should be stated in

terms of the measuring unit current at the end of the reporting period. The


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corresponding figures for the previous period required by Ind AS 1,

Presentation of Financial Statements, and any information in respect of

earlier periods should also be stated in terms of the measuring unit current at

the end of the reporting period. For the purpose of presenting comparative

amounts in a different presentation currency, Ind AS 21, The Effects of

Changes in Foreign Exchange Rates should be applied.

The gain or loss on the net monetary position should be included in profit or

loss and separately disclosed.

Historical Cost Financial Statements

Current Cost Financial Statements

Balance Sheet

Amounts not already expressed in terms of the measuring unit current at the end of the reporting period are restated by applying a general price index.

Monetary items are not restated since they are carried at current amounts at the end of the reporting period.

Assets and liabilities linked by agreement to changes in prices are adjusted in accordance with the agreement in order to ascertain the amount outstanding at the end of the reporting period. They are carried at this adjusted amount in the restated balance sheet.

All non-monetary items not carried at current amounts at the end of the reporting period are restated.

Balance Sheet

Items stated at current cost are not restated because they are already expressed in terms of the measuring unit current at the end of the reporting period. All other items follow measurement is same as described for Historical Costs Financial Statements.

Statement of profit and loss

All amounts need to be restated by applying the change in the general

Statement of profit and loss

All amounts need to be restated into the measuring unit current at the end


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price index from the dates when the items of income and expenses were initially recorded in the financial statements.

of the reporting period by applying a general price index.

Gain or loss on net monetary position

The gain or loss may be estimated by applying the change in a general price index to the weighted average for the period of the difference between monetary assets and monetary liabilities. The gain or loss on the net monetary position is included in profit or loss.

Gain or loss on net monetary position

The gain or loss on the net monetary position is accounted for in the same manner as described for Historical Cost Financial Statements.

The restatement of financial statements in accordance with this Standard

requires the application of certain procedures as well as judgement. The

consistent application of these procedures and judgements from period to

period is more important than the precise accuracy of the resulting amounts

included in the restated financial statements.


may give rise to differences between the carrying amount of individual assets

and liabilities in the balance sheet and their tax bases. These differences are

accounted for in accordance with Ind AS 12, Income Taxes.

This Standard requires that all items in the statement of cash flows are

expressed in terms of the measuring unit current at the end of the reporting

period.

Corresponding figures for the previous reporting period, whether they were

based on a historical cost approach or a current cost approach, are restated

by applying a general price index so that the comparative financial

statements are presented in terms of the measuring unit current at the end of


A parent that reports in the currency of a hyperinflationary economy may

have subsidiaries that also report in the currencies of hyperinflationary

economies. The financial statements of any such subsidiary need to be

restated by applying a general price index of the country in whose currency it

reports before they are included in the consolidated financial statements


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issued by its parent. Where such a subsidiary is a foreign subsidiary, its

restated financial statements are translated at closing rates. The financial

statements of subsidiaries that do not report in the currencies of

hyperinflationary economies are dealt with in accordance with Ind AS 21.


requires the use of a general price index that reflects changes in general

purchasing power. It is preferable that all entities that report in the currency

of the same economy use the same index.

Economies ceasing to be hyperinflationary

When an economy ceases to be hyperinflationary and an entity discontinues

the preparation and presentation of financial statements prepared in

accordance with this Standard, it shall treat the amounts expressed in the

measuring unit current at the end of the previous reporting period as the

basis for the carrying amounts in its subsequent financial statements.

Disclosure

The following disclosures shall be made:

a) the fact that the financial statements and the corresponding figures for

previous periods have been restated for the changes in the general

purchasing power of the functional currency and, as a result, are

stated in terms of the measuring unit current at the end of the reporting

period;

b) whether the financial statements are based on a historical cost

approach or a current cost approach; and

c) the identity and level of the price index at the end of the reporting

period and the movement in the index during the current and the

previous reporting period.

d) the duration of the hyperinflationary situation existing in the economy.

The disclosures required by this Standard are needed to make clear the

basis of dealing with the effects of inflation in the financial statements. They

are also intended to provide other information necessary to understand that

basis and the resulting amounts.

Appendix A of Ind AS 29 provides guidance on how to apply the

requirements of Ind AS 29 in a reporting period in which an entity identifies


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the existence of hyperinflation in the economy of its functional currency,

when that economy was not hyperinflationary in the prior period, and the

entity therefore restates its financial statements in accordance with Ind AS

29. The Appendix prescribes that in the reporting period in which an entity

identifies the existence of hyperinflation in the economy of its functional

currency, not having been hyperinflationary in the prior period, the entity

shall apply the requirements of Ind AS 29 as if the economy had always been

hyperinflationary. At the end of the reporting period, deferred tax items are

recognised and measured in accordance with Ind AS 12.

Appendix A also provides guidance on the entity’s opening balance sheet for

the reporting period as well as the entity’s opening balance sheet at the

beginning of the earliest period presented.

After an entity has restated its financial statements, all corresponding figures

in the financial statements for a subsequent reporting period, including

deferred tax items, are restated by applying the change in the measuring unit

for that subsequent reporting period only to the restated financial statements

for the previous reporting period.


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Ind AS 32, Financial Instruments: Presentation The objective of this Standard is to establish principles for presenting

financial instruments as liabilities or equity and for offsetting financial assets

and financial liabilities. It applies to the classification of financial instruments,

from the perspective of the issuer, into financial assets, financial liabilities

and equity instruments; the classification of related interest, dividends,

losses and gains; and the circumstances in which financial assets and

financial liabilities should be offset.

Definitions

A financial instrument is any contract that gives rise to a financial asset of one

entity and a financial liability or equity instrument of another entity.

A financial asset is any asset that is:

(a) cash;

(b) an equity instrument of another entity;

(c) a contractual right:

(i) to receive cash or another financial asset from another entity; or

(ii) to exchange financial assets or financial liabilities with another

entity under conditions that are potentially favourable to the entity;

or

(d) a contract that will or may be settled in the entity’s own equity instruments

and is:

(i) a non-derivative for which the entity is or may be obliged to receive

a variable number of the entity’s own equity instruments; or

(ii) a derivative that will or may be settled other than by the exchange

of a fixed amount of cash or another financial asset for a fixed

number of the entity’s own equity instruments. For this purpose the

entity’s own equity instruments do not include puttable financial

instruments classified as equity instruments, instruments that

impose on the entity an obligation to deliver to another party a pro

rata share of the net assets of the entity only on liquidation and are

classified as equity instruments, or instruments that are contracts

for the future receipt or delivery of the entity’s own equity

instruments.


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A financial liability is any liability that is:

(a) a contractual obligation :

(i) to deliver cash or another financial asset to another entity; or

(ii) to exchange financial assets or financial liabilities with another

entity under conditions that are potentially unfavourable to the

entity; or

(b) a contract that will or may be settled in the entity’s own equity instruments

and is:

(i) a non-derivative for which the entity is or may be obliged to deliver

a variable number of the entity’s own equity instruments; or

(ii) a derivative that will or may be settled other than by the exchange

of a fixed amount of cash or another financial asset for a fixed

number of the entity’s own equity instruments. For this purpose,

rights, options or warrants to acquire a fixed number of the entity’s

own equity instruments for a fixed amount of any currency are

equity instruments if the entity offers the rights, options or warrants pro rata to all of its existing owners of the same class of its own

non-derivative equity instruments. Apart from the aforesaid, the

equity conversion option embedded in a convertible bond

denominated in foreign currency to acquire a fixed number of the

entity’s own equity instruments is an equity instrument if the

exercise price is fixed in any currency. Also, for these purposes the

entity’s own equity instruments do not include puttable financial

instruments that are classified as equity instruments, instruments

that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation and

are classified as equity instruments in, or instruments that are

contracts for the future receipt or delivery of the entity’s own equity

instruments.

Presentation of liabilities and equity

The issuer of a financial instrument shall classify the instrument, or its

component parts, on initial recognition as a financial liability, a financial asset

or an equity instrument in accordance with the substance of the contractual

arrangement and the definitions of a financial liability, a financial asset and

an equity instrument.


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An equity instrument is any contract that evidences a residual interest in the

assets of an entity after deducting all of its liabilities.

A financial instrument is an equity instrument if, and only if, both the following

conditions are met.

(a) The instrument includes no contractual obligation:

(i) to deliver cash or another financial asset to another entity; or

(ii) to exchange financial assets or financial liabilities with another entity

under conditions that are potentially unfavourable to the issuer; and

(b) If the instrument will or may be settled in the issuer’s own equity

instruments, it is:

(i) a non-derivative that includes no contractual obligation for the issuer to

deliver a variable number of its own equity instruments; or

(ii) a derivative that will be settled only by the issuer exchanging a fixed

amount of cash or another financial asset for a fixed number of its own

equity instruments.

A puttable instrument is a financial instrument that gives the holder the right to

put the instrument back to the issuer for cash or another financial asset or is

automatically put back to the issuer on the occurrence of an uncertain future

event or the death or retirement of the instrument holder.

As an exception to the definition of a financial liability, a puttable instrument

is classified as an equity instrument if it has all the following features:

(a) It entitles the holder to a pro rata share of the entity’s net assets in the

event of the entity’s liquidation.

(b) The instrument is in the class of instruments that is subordinate to all

other classes of instruments and:

(i) has no priority over other claims to the assets of the entity on

liquidation, and

(ii) does not need to be converted into another instrument before it

is in the class of instruments that is subordinate to all other

classes of instruments.

(c) All financial instruments in that class have identical features.

(d) Apart from the contractual obligation for the issuer to repurchase or

redeem the instrument for cash or another financial asset, the


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instrument does not include any contractual obligation to deliver cash

or another financial asset to another entity, or to exchange financial

assets or financial liabilities with another entity under conditions that

are potentially unfavourable to the entity, and it is not a contract that

will or may be settled in the entity’s own equity instruments.

(e) The total expected cash flows attributable to the instrument over the

life of the instrument are based substantially on the profit or loss, the

change in the recognised net assets or the change in the fair value of

the recognised and unrecognised net assets of the entity over the life

of the instrument (excluding any effects of the instrument).

(f) the issuer must have no other financial instrument or contract that has:

(i) total cash flows based substantially on the profit or loss, the

change in the recognised net assets or the change in the fair

value of the recognised and unrecognised net assets of the

entity (excluding any effects of such instrument or contract); and

(ii) the effect of substantially restricting or fixing the residual return

to the puttable instrument holders.

Compound financial instruments

The issuer of a non-derivative financial instrument shall evaluate the terms of

the financial instrument to determine whether it contains both a liability and

an equity component. Such components shall be classified separately as

financial liabilities, financial assets or equity instruments.

Treasury shares

If an entity reacquires its own equity instruments, those instruments

(‘treasury shares’) shall be deducted from equity. No gain or loss shall be

recognised in profit or loss on the purchase, sale, issue or cancellation of an

entity’s own equity instruments. Such treasury shares may be acquired and

held by the entity or by other members of the consolidated group.

Consideration paid or received shall be recognised directly in equity.

Interest, dividends, losses and gains

Interest, dividends, losses and gains relating to a financial instrument

or a component that is a financial liability shall be recognised as

income or expense in profit or loss.


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Distributions to holders of an equity instrument shall be recognised by

the entity directly in equity.

Transaction costs of an equity transaction shall be accounted for as a

deduction from equity.

Offsetting a financial asset and liability

A financial asset and a financial liability shall be offset and the net amount

presented in the balance sheet when only when, an entity:

(a) currently has a legally enforceable right to set off the recognised

amounts; and

(b) intends either to settle on a net basis, or to realise the asset and settle

the liability simultaneously.

In accounting for a transfer of a financial asset that does not qualify for

derecognition, the entity shall not offset the transferred asset and the

associated liability.

Consolidated financial statements

An entity in its consolidated financial statements, when classifying a financial

instrument (or a component of it) should consider all terms and conditions

agreed between members of the group and the holders of the instrument in

determining whether the group as a whole has an obligation to deliver cash

or another financial asset in respect of the instrument or to settle it in a

manner that results in liability classification.


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Ind AS 33, Earnings per share The objective of this Standard is to prescribe principles for the determination

and presentation of earnings per share, so as to improve performance

comparisons between different entities in the same reporting period and

between different reporting periods for the same entity. The focus of this

Standard is on the denominator of the earnings per share calculation.

Scope

Ind AS 33 shall be applied to companies that have issued ordinary shares to which Indian Accounting Standards (Ind AS) notified under the Companies

Act applies. An entity that discloses earnings per share shall calculate and

disclose earnings per share in accordance with this Standard.

When an entity presents both consolidated financial statements and separate

financial statements, the disclosures required by this Standard shall be

presented both in the consolidated financial statements and separate

financial statements based on the information in the respective financial

statements.

An ordinary share is an equity instrument that is subordinate to all other

classes of equity instruments. A potential ordinary share is a financial

instrument or other contract that may entitle its holder to ordinary shares.

Basic earnings per share

An entity shall calculate basic earnings per share amounts for profit or loss

attributable to ordinary equity holders of the parent entity and, if presented,

profit or loss from continuing operations attributable to those equity holders.

Basic earnings per share shall be calculated by dividing profit or loss

attributable to ordinary equity holders of the parent entity (the numerator) by

the weighted average number of ordinary shares outstanding (the

denominator) during the period.

Earnings

For the purpose of calculating basic earnings per share,the amounts

attributable to ordinary equity holders of the parent entity shall be:

a) profit or loss from continuing operations attributable to the parent

entity; and

b) profit or loss attributable to the parent entity,


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adjusted for the after-tax amounts of preference dividends, differences

arising on the settlement of preference shares, and other similar effects of

preference shares classified as equity.

Where any item of income or expense which is otherwise required to be

recognised in profit or loss in accordance with Indian Accounting Standards

is debited or credited to securities premium account or other reserves, the

amount in respect thereof shall be deducted from profit or loss from

continuing operations for the purpose of calculating basic earnings per share.

Shares

For the purpose of calculating basic earnings per share, the number of

ordinary shares shall be the weighted average number of ordinary shares

outstanding during the period.

The number of ordinary shares shall be the weighted average number of

ordinary shares outstanding during the period, adjusted for events other than

the conversion of potential ordinary shares, that have changed the number of

ordinary shares outstanding without a corresponding change in resources.

Shares are usually included in the weighted average number of shares from

the date consideration is receivable (which is generally the date of their

issue). The Standard includes examples of scenarios when ordinary shares

are issued including shares issued as part of the consideration transferred in

business combination and issued upon the conversion of a mandatorily

convertible instrument.

Contingently issuable shares are treated as outstanding and are included in

the calculation of basic earnings per share only from the date when all

necessary conditions are satisfied (i.e. the events have occurred). Shares

that are issuable solely after passage of time are not contingently issuable

shares, because the passage of time is a certainty.

The Standard also includes examples where ordinary shares may be issued

or reduced without a corresponding change in resources.

Diluted earnings per share

An entity shall calculate diluted earnings per share amounts for profit or loss

attributable to ordinary equity holders of the parent entity and, if presented,

profit or loss from continuing operations attributable to those equity holders.


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For the purpose of calculating diluted earnings per share, an entity shall

adjust profit or loss attributable to ordinary equity holders of the parent entity,

and the weighted average number of shares outstanding, for the effects of all

dilutive potential ordinary shares.

Dilution is a reduction in earnings per share or an increase in loss per share

resulting from the assumption that convertible instruments are converted,

that options or warrants are exercised, or that ordinary shares are issued

upon the satisfaction of specified conditions.

Earnings


adjust profit or loss attributable to ordinary equity holders of the parent entity,

by the after-tax effect of income or expense resulting from dilutive potential

ordinary shares.

Shares

For the purpose of calculating diluted earnings per share, the number of

ordinary shares shall be the weighted average number of ordinary shares,

plus the weighted average number of ordinary shares that would be issued

on conversion of all the dilutive potential ordinary shares into ordinary

shares. Dilutive potential ordinary shares shall be deemed to have been

converted into ordinary shares at the beginning of the period or, if later, the

date of the issue of the potential ordinary shares.

Dilutive potential ordinary shares

Potential ordinary shares shall be treated as dilutive when, and only when,

their conversion to ordinary shares would decrease earnings per share or

increase loss per share from continuing operations.

An entity uses profit or loss from continuing operations attributable to the

parent entity as the control number to establish whether potential ordinary

shares are dilutive or antidilutive. In determining whether potential ordinary

shares are dilutive or antidilutive, each issue or series of potential ordinary

shares is considered separately rather than in aggregate. The sequence in

which potential ordinary shares are considered may affect whether they are

dilutive.


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Potential ordinary shares are antidilutive when their conversion to ordinary

shares would increase earnings per share or decrease loss per share from

continuing operations. The calculation of diluted earnings per share does not

assume conversion, exercise, or other issue of potential ordinary shares that

would have an antidilutive effect on earnings per share.

Options, warrants and their equivalents


assume the exercise of dilutive options and warrants of the entity. The

assumed proceeds from these instruments shall be regarded as having been

received from the issue of ordinary shares at the average market price of

ordinary shares during the period. The difference between the number of

ordinary shares issued and the number of ordinary shares that would have

been issued at the average market price of ordinary shares during the period

shall be treated as an issue of ordinary shares for no consideration.

Convertible instruments

The dilutive effect of convertible instruments shall be reflected in diluted

earnings per share. Convertible preference shares are antidilutive whenever

the amount of dividend on such shares declared in or accumulated for the

current period per ordinary share obtainable on conversion exceeds basic

earnings per share. Similarly, convertible debt is antidilutive whenever its

interest (net of tax and other changes in income or expense) per ordinary

share obtainable on conversion exceeds basic earnings per share.

Contingently issuable shares

As in the calculation of basic earnings per share, contingently issuable

ordinary shares are treated as outstanding and included in the calculation of

diluted earnings per share if the conditions are satisfied. If the conditions are

not satisfied, the number of contingently issuable shares included in the

diluted earnings per share calculation is based on the number of shares that

would be issuable if the end of the period were the end of the contingency

period. Contingently issuable shares are included from the beginning of the

period (or from the date of the contingent share agreement, if later).

Contracts that may be settled in ordinary shares or cash

When an entity has issued a contract that may be settled in ordinary shares

or cash at the entity’s option, the entity shall presume that the contract will be


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settled in ordinary shares, and the resulting potential ordinary shares shall be

included in diluted earnings per share if the effect is dilutive.

For contracts that may be settled in ordinary shares or cash at the holder’s

option, the more dilutive of cash settlement and share settlement shall be

used in calculating diluted earnings per share.

Purchased options

Contracts such as purchased put options and purchased call options (i.e.

options held by the entity on its own ordinary shares) are not included in the

calculation of diluted earnings per share because including them would be

antidilutive.

Written put options

Contracts that require the entity to repurchase its own shares, such as

written put options and forward purchase contracts, are reflected in the

calculation of diluted earnings per share if the effect is dilutive.

Retrospective adjustments

If the number of ordinary or potential ordinary shares outstanding increases

as a result of a capitalisation, bonus issue or share split, or decreases as a

result of a reverse share split, the calculation of basic and diluted earnings

per share for all periods presented shall be adjusted retrospectively.

If these changes occur after the reporting period but before the financial

statements are approved for issue, the per share calculations for those and

any prior period financial statements presented shall be based on the new

number of shares. The fact that per share calculations reflect such changes

in the number of shares shall be disclosed.

In addition, basic and diluted earnings per share of all periods presented

shall be adjusted for the effects of errors and adjustments resulting from

changes in accounting policies accounted for retrospectively.

Presentation

An entity shall present in the statement of profit and loss basic and diluted

earnings per share for profit or loss from continuing operations attributable to

the ordinary equity holders of the parent entity and for profit or loss

attributable to the ordinary equity holders of the parent entity for the period

for each class of ordinary shares that has a different right to share in profit


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for the period. An entity shall present basic and diluted earnings per share

with equal prominence for all periods presented.

An entity that reports a discontinued operation shall disclose the basic and

diluted amounts per share for the discontinued operation either in the

statement of profit and loss or in the notes.

An entity shall present basic and diluted earnings per share, even if the

amounts are negative (ie a loss per share).

Disclosure

An entity shall disclose the following:

a) the amounts used as the numerators in calculating basic and diluted

earnings per share, and a reconciliation of those amounts to profit or

loss attributable to the parent entity for the period. The reconciliation

shall include the individual effect of each class of instruments that

affects earnings per share.

b) the weighted average number of ordinary shares used as the

denominator in calculating basic and diluted earnings per share, and a

reconciliation of these denominators to each other. The reconciliation

shall include the individual effect of each class of instruments that

affects earnings per share.

c) instruments (including contingently issuable shares) that could

potentially dilute basic earnings per share in the future, but were not

included in the calculation of diluted earnings per share because they

are antidilutive for the period(s) presented.

d) transactions, other than with respect to retrospective adjustments, that

occur after the reporting period and that would have changed

significantly the number of ordinary shares or potential ordinary shares

outstanding at the end of the period if those transactions had occurred

before the end of the reporting period.

If an entity discloses, in addition to basic and diluted earnings per share,

amounts per share using a reported component of the statement of profit and

loss other than one required by this Standard, such amounts shall be

calculated using the weighted average number of ordinary shares determined

in accordance with this Standard. An entity shall indicate the basis on which

the numerator(s) is (are) determined, including whether amounts per share


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are before tax or after tax. If a component of the statement of profit and loss

is used that is not reported as a line item in the statement of profit and loss,

reconciliation shall be provided between the component used and a line item

that is reported in the statement of profit and loss.


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Ind AS 34, Interim Financial Reporting The objective of this Standard is to prescribe the minimum content of an

interim financial report and to prescribe the principles for recognition and

measurement in complete or condensed financial statements for an interim

period. Timely and reliable interim financial reporting improves the ability of

investors, creditors, and others to understand an entity’s capacity to generate

earnings and cash flows and its financial condition and liquidity.

This Standard applies if an entity is required or elects to publish an interim

financial report in accordance with Indian Accounting Standards.

Interim financial report means a financial report containing either a

complete set of financial statements (as described in Ind AS 1, Presentation

of Financial Statements) or a set of condensed financial statements (as

described in this Standard) for an interim period.

In the interest of timeliness and cost considerations and to avoid repetition of

information previously reported, an entity may be required to or may elect to

provide less information at interim dates as compared with its annual

financial statements. This Standard defines the minimum content of an

interim financial report as including condensed financial statements and

selected explanatory notes. The interim financial report is intended to provide

an update on the latest complete set of annual financial statements.

Accordingly, it focuses on new activities, events, and circumstances and

does not duplicate information previously reported.

Nothing in this Standard is intended to prohibit or discourage an entity from

publishing a complete set of financial statements (as described in Ind AS 1)

in its interim financial report, rather than condensed financial statements and

selected explanatory notes. If an entity publishes a complete set of financial

statements in its interim financial report, the form and content of those

statements shall conform to the requirements of Ind AS 1 for a complete set

of financial statements.

Minimum components of an interim financial report

An interim financial report should include, at a minimum, the following

components:

a) a condensed balance sheet ;


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b) a condensed statement of profit and loss;

c) a condensed statement of changes in equity;

d) a condensed statement of cash flows; and

e) selected explanatory notes.

Form and content of interim financial statements

If an entity publishes a complete set of financial statements in its interim

financial report, the form and content of those statements shall conform to

the requirements of Ind AS 1 for a complete set of financial statements.

If an entity publishes a set of condensed financial statements in its interim

financial report, those condensed statements should include, at a minimum,

each of the headings and subtotals that were included in its most recent

annual financial statements and the selected explanatory notes as required

by this Standard. Additional line items or notes should be included if their

omission would make the condensed interim financial statements misleading.

In the statement that presents the components of profit or loss for an interim

period, an entity shall present basic and diluted earnings per share for that

period when the entity is within the scope of Ind AS 33.

Significant events and transactions

An entity shall include in its interim financial report an explanation of events

and transactions that are significant to an understanding of the changes in

financial position and performance of the entity since the end of the last

annual reporting period. Information disclosed in relation to those events and

transactions shall update the relevant information presented in the most

recent annual financial report.

Other Disclosures

In addition to disclosing significant events and transactions, an entity shall

include information as described in this Standard, in the notes to its interim

financial statements, if not disclosed elsewhere in the interim financial report.

The information shall normally be reported on a financial year-to-date basis.

Disclosure of compliance with Ind Ass

If an entity’s interim financial report is in compliance with this Standard, that

fact shall be disclosed. An interim financial report shall not be described as


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complying with Ind ASs unless it complies with all of the requirements of Ind

ASs.

Periods for which interim financial statements are required to be presented

Interim reports – balance sheet, statements of profit and loss, statement of

changes in equity and statement of cash flows shall include interim financial

statements (condensed or complete) for current interim period and

comparative period in immediately preceding financial year.

Materiality

In deciding how to recognise, measure, classify, or disclose an item for

interim financial reporting purposes, materiality shall be assessed in relation

to the interim period financial data. In making assessments of materiality, it

shall be recognised that interim measurements may rely on estimates to a

greater extent than measurements of annual financial data.

Disclosure in annual financial statements

If an estimate of an amount reported in an interim period is changed

significantly during the final interim period of the financial year but a separate

financial report is not published for that final interim period, the nature and

amount of that change in estimate shall be disclosed in a note to the annual

financial statements for that financial year.

Recognition and measurement

An entity shall apply the same accounting policies in its interim financial

statements as are applied in its annual financial statements, except for

accounting policy changes made after the date of the most recent annual

financial statements that are to be reflected in the next annual financial

statements. To achieve that objective, measurements for interim reporting

purposes shall be made on a year-to-date basis.

Revenues received seasonally, cyclically, or occasionally

Revenues that are received seasonally, cyclically, or occasionally within a

financial year shall not be anticipated or deferred as of an interim date if

anticipation or deferral would not be appropriate at the end of the entity’s

financial year. Examples include dividend revenue, royalties and

government grants.


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Costs incurred unevenly during the financial year

Costs that are incurred unevenly during an entity’s financial year shall be

anticipated or deferred for interim reporting purposes if, and only if, it is also

appropriate to anticipate or defer that type of cost at the end of the financial

year.

Use of estimates

The measurement procedures to be followed in an interim financial report

shall be designed to ensure that the resulting information is reliable and that

all material financial information that is relevant to an understanding of the

financial position or performance of the entity is appropriately disclosed.

While measurements in both annual and interim financial reports are often

based on reasonable estimates, the preparation of interim financial reports

generally will require a greater use of estimation methods than annual

financial reports.

Restatement of previously reported interim periods

A change in accounting policy, other than one for which the transition is

specified by a new Ind AS, shall be reflected by:

a) restating the financial statements of prior interim periods of the current

financial year and the comparable interim periods of any prior financial

years that will be restated in the annual financial statements in

accordance with Ind AS 8; or

b) when it is impracticable to determine the cumulative effect at the

beginning of the financial year of applying a new accounting policy to

all prior periods, adjusting the financial statements of prior interim

periods of the current financial year, and comparable interim periods of

prior financial years to apply the new accounting policy prospectively

from the earliest date practicable.

The objective of the preceding principle is to ensure that a single accounting

policy is applied to a particular class of transactions throughout an entire

financial year. The effect of the principle is to require that within the current

financial year any change in accounting policy isapplied either retrospectively

or, if that is not practicable, prospectively, from no later than the beginning of

the financial year.


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There is an issue that whether an entity should reverse impairment losses

recognised in an interim period on goodwill in case if a loss would not have

been recognised, or a smaller loss would have been recognised, had an

impairment assessment been made only at the end of a subsequent

reporting period. Appendix A of Ind AS 34 prescribes that an entity shall not

reverse an impairment loss recognised in a previous interim period in respect

of goodwill. Further this Appendix also prescribes that an entity shall not

extend this accounting principle by analogy to other areas of potential conflict

between Ind AS 34 and other Indian Accounting Standards.


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Ind AS 36, Impairment of Assets The objective of this Standard is to prescribe the procedures that an entity

applies to ensure that its assets are carried at no more than their recoverable

amount. An asset is carried at more than its recoverable amount if its

carrying amount exceeds the amount to be recovered through use or sale of

the asset. If this is the case, the asset is described as impaired and the

Standard requires the entity to recognise an impairment loss. The Standard

also specifies when an entity should reverse an impairment loss and

prescribes disclosures.

An entity shall assess at the end of each reporting period whether there is

any indication that an asset may be impaired. If any such indication exists,

the entity shall estimate the recoverable amount of the asset.

However,irrespective of whether there is any indication of impairment, an

entity shall also:

a) test an intangible asset with an indefinite useful life or an intangible

asset not yet available for use for impairment annually by comparing

its carrying amount with its recoverable amount.

b) test goodwill acquired in a business combination for impairment

annually.

If there is an indication that an asset may be impaired, recoverable amount

shall be estimated for individual asset. If it is not possible to estimate the

recoverable amount of the individual asset, the entity shall determine the

recoverable amount of the cash generating unit to which the asset belongs

(the asset’s cash generating unit).

A cash-generating unit is the smallest identifiable group of assets that

generates cash inflows that are largely independent of the cash inflows from

other assets or groups of assets.

Measuring the recoverable amount

The recoverable amount of an asset or a cash-generating unit is the higher

of its fair value less costs of disposal and its value in use.

It is not always necessary to determine both an asset’s fair value less costs

of disposal and its value in use. If either of these amounts exceeds the


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asset’s carrying amount, the asset is not impaired and it is not necessary to

estimate the other amount.

Value in use

Fair value is the price that would be received to sell an asset or paid to

transfer a liability in an orderly transaction between market participants at the

measurement date.

Costs of disposal are incremental costs directly attributable to the disposal of

an asset or cash-generating unit, excluding finance costs and income tax

expense.

Value in use is the present value of the future cash flows expected to be

derived from an asset or cash-generating unit.

The following elements shall be reflected in the calculation of an asset’s

value in use:

(a) an estimate of the future cash flows the entity expects to derive from

the asset;

(b) expectations about possible variations in the amount or timing of those

future cash flows;

(c) the time value of money, represented by the current market risk-free

rate of interest;

(d) the price for bearing the uncertainty inherent in the asset; and

(e) other factors, such as illiquidity, that market participants would reflect

in pricing the future cash flows the entity expects to derive from the

asset.

Recognising and measuring an impairment loss

If and only if, the recoverable amount of an asset is less than its carrying

amount, the carrying amount of the asset shall be reduced to its recoverable

amount. That reduction is an impairment loss.

An impairment loss shall be recognised immediately in profit or loss, unless

the asset is carried at revalued amount in accordance with another Standard

(for example, in accordance with the revaluation model in Ind AS 16). An

impairment loss on a non-revalued asset is recognised in profit or loss.

However, an impairment loss on a revalued asset is recognised in other


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comprehensive income to the extent that the impairment loss does not

exceed the amount in the revaluation surplus for that same asset. Such an

impairment loss on a revalued asset reduces the revaluation surplus for that

asset.

Cash-generating units and goodwill

If there is any indication that an asset may be impaired, recoverable amount

shall be estimated for the individual asset. If it is not possible to estimate the

recoverable amount of the individual asset, the entity shall determine the

recoverable amount of the cash-generating unit to which the asset belongs

(the asset’s cash-generating unit).

For the purpose of impairment testing, goodwill acquired in a business

combination shall be allocated to each of the acquirer’s cash-generating

units, or groups of cash-generating units, that is expected to benefit from the

synergies of the combination, irrespective of whether other assets or

liabilities of the acquiree are assigned to those units or groups of units.

For the purpose of impairment testing, goodwill acquired in a business

combination shall, from the acquisition date, be allocated to each of the

acquirer’s cash-generating units, or groups of cash-generating units, that is

expected to benefit from the synergies of the combination, irrespective of

whether other assets or liabilities of the acquiree are assigned to those units

or groups of units.

The annual impairment test for a cash-generating unit to which goodwill has

been allocated may be performed at any time during an annual period,

provided the test is performed at the same time every year. Different cash-

generating units may be tested for impairment at different times. However, if

some or all of the goodwill allocated to a cash-generating unit was acquired

in a business combination during the current annual period, that unit shall be

tested for impairment before the end of the current annual period.

The Standard permits the most recent detailed calculation made in a

preceding period of the recoverable amount of a cash-generating unit to

which goodwill has been allocated to be used in the impairment test of that

unit in the current period provided specified criteria are met.

Impairment loss for cash-generating unit

An impairment loss shall be recognised for a cash-generating unit (the


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smallest group of cash-generating units to which goodwill or a corporate

asset has been allocated) if, and only if, the recoverable amount of the unit

(group of units) is less than the carrying amount of the unit (group of units).

The impairment loss shall be allocated to reduce the carrying amount of the

assets of the unit (group of units) in the following order:

(a) first, to reduce the carrying amount of any goodwill allocated to the

cash-generating unit (group of units); and

(b) then, to the other assets of the unit (group of units) pro rata on the

basis of the carrying amount of each asset in the unit (group of units).

These reductions in carrying amounts shall be treated as impairment losses

on individual assets. In allocating an impairment loss, an entity shall not

reduce the carrying amount of an asset below the highest of:

(a) its fair value less costs of disposal (if measurable);

(b) its value in use (if determinable); and

(c) zero.

The amount of the impairment loss that would otherwise have been allocated

to the asset shall be allocated pro rata to the other assets of the unit (group

of units).

Reversing an impaitment loss

An entity shall assess at the end of each reporting period whether there is

any indication that an impairment loss recognised in prior periods for an

asset other than goodwill may no longer exist or may have decreased. If any

such indication exists, the entity shall estimate the recoverable amount of

that asset.

An impairment loss recognised in prior periods for an asset other than

goodwill shall be reversed if there has been a change in the estimates used

to determine the asset’s recoverable amount since the last impairment loss

was recognised, in which case the carrying amount of the asset shall be

increased to its recoverable amount.

The increased carrying amount of an asset other than goodwill attributable to

a reversal of an impairment loss shall not exceed the carrying amount that

would have been determined (net of amortisation or depreciation) had no

impairment loss been recognised for the asset in prior years.


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A reversal of an impairment loss for an asset other than goodwill shall be

recognised immediately in profit or loss, unless the asset is carried at

revalued amount.

After a reversal of an impairment loss is recognised, the depreciation

(amortisation) charge for the asset shall be adjusted in future periods to

allocate the asset’s revised carrying amount, less its residual value (if any),

on a systematic basis over its remaining useful life.

A reversal of an impairment loss for a cash-generating unit shall be allocated

to the assets of the unit, except for goodwill, pro rata with the carrying

amounts of those assets. These increases in carrying amounts shall be

treated as reversals of impairment losses for individual assets.

In allocating a reversal of an impairment loss for a cash-generating unit, the

carrying amount of an asset shall not be increased above the lower of:

(a) its recoverable amount (if determinable); and

(b) the carrying amount that would have been determined (net of

amortisation or depreciation) had no impairment loss been recognised

for the asset in prior periods.

The amount of the reversal of the impairment loss that would otherwise have

been allocated to the asset shall be allocated pro rata to the other assets of

the unit, except for goodwill.

An impairment loss recognised for goodwill shall not be reversed in a

subsequent period.


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Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets The objective of this Standard is to ensure that appropriate recognition

criteria and measurement bases are applied to provisions, contingent

liabilities and contingent assets and that sufficient information is disclosed in

the notes to enable users to understand their nature, timing and amount.

Ind AS 37 prescribes the accounting and disclosures for provisions,

contingent liabilities and contingent assets, except:

(a) those resulting from executory contracts, except where the contract is

onerous; and

(b) those covered by another Standard.

Ind AS 37 also do not apply to financial instruments (including guarantees)

that are within the scope of Ind AS 109, Financial Instruments.

Provisions

A provision is a liability of uncertain timing or amount.

A liability is a present obligation of the entity arising from past events, the

settlement of which is expected to result in an outflow from the entity of

resources embodying economic benefits.

An obligating event is an event that creates a legal or constructive obligation

that results in an entity having no realistic alternative to settling that obligation.

A legal obligation is an obligation that derives from:

(a) a contract (through its explicit or implicit terms);

(b) legislation; or

(c) other operation of law.

A constructive obligation is an obligation that derives from an entity’s actions

where:

(a) by an established pattern of past practice, published policies or a

sufficiently specific current statement, the entity has indicated to other

parties that it will accept certain responsibilities; and

(b) as a result, the entity has created a valid expectation on the part of those

other parties that it will discharge those responsibilities.


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A provision shall be recognised if and only if:

(a) an entity has a present obligation (legal or constructive) as a result of

a past event;

(b) payment is probable (more likely than not); and

(c) a reliable estimate can be made of the amount of the obligation.

If these conditions are not met, provision shall not be recognised.

Provisions shall be reviewed at the end of each reporting period and adjusted

to reflect the current best estimate. If it is no longer probable that an outflow

of resources embodying economic benefits will be required to settle the

obligation, the provision shall be reversed.

Present Obligation

In rare cases where it is not clear whether there exists a present obligation, a

past event is deemed to give rise to a present obligation if, after taking

account of all available evidence, it is more likely that a present obligation

may exist at the end of the reporting period.

Measurement

The amount recognised as a provision shall be the best estimate of the

expenditure required to settle the present obligation at the end of the

reporting period. The best estimate of the expenditure required to settle the

present obligation is the amount that an entity would rationally pay to settle

the obligation at the end of the reporting period or to transfer it to a third

party at that time.

Where the provision being measured involves a large population of items, the

obligation is estimated by weighting all possible outcomes by their associated

probabilities. Where a single obligation is being measured, the individual

most likely outcome may be the best estimate of the liability. However, even

in such a case, the entity considers other possible outcomes.

Best estimate - The amount recognised as a provision should be the best

estimate of the expenditure required to settle the present obligation at the

end of the reporting period. In reaching its best estimate, the entity should

take into account the risks and uncertainties that surround the underlying

events.


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Time value of money - Where the effect of the time value of money is

material, the amount of a provision shall be the present value of the

expenditures expected to be required to settle the obligation.

Future events - Future events that may affect the amount required to settle

an obligation shall be reflected in the amount of a provision where there is

sufficient objective evidence that they will occur.

Provisions for one-off events (restructuring, environmental clean-up,

settlement of a lawsuit) are measured at the most likely amount.

Provisions for large populations of events (warranties, customer

refunds) are measured at a probability-weighted expected value.

Both measurements are at discounted present value using a pre-tax

discount rate that reflects the current market assessments of the time

value of money and the risks specific to the liability.

In measuring a provision consider future events as follows:

₋ forecast reasonable changes in applying existing technology;

₋ ignore possible gains on sale of assets;

₋ consider changes in legislation only if virtually certain to be

enacted.

Expected disposal of assets - Gains from the expected disposal of assets

shall not be taken into account in measuring a provision.

Reimbursements - Where some or all of the expenditure required to settle a

provision is expected to be reimbursed by another party, the reimbursement

should be recognised when, it is virtually certain that reimbursement will be

received if the entity settles the obligation. The reimbursement shall be

treated as a separate asset. The amount recognised for the reimbursement

shall not exceed the amount of the provision. In the statement of profit and

loss, the expense relating to a provision may be presented net of the amount

recognised for a reimbursement.

Onerous contracts

If an entity has a contract that is onerous, the present obligation under the

contract shall be recognised and measured as a provision. This Standard

defines an onerous contract as a contract in which the unavoidable costs of

meeting the obligations under the contract exceed the economic benefits


164

expected to be received under it. The unavoidable costs under a contract

reflect the least net cost of exiting from the contract, which is the lower of the

cost of fulfilling it and any compensation or penalties arising from failure to

fulfill it.

Restructuring

A provision for restructuring costs is recognised only when the general

recognition criteria for provisions are met.

With respect to restructuring obligation, the Standard provides guidance for

application of general recognition conditions that need to be complied with

for recognition of restructuring provision and identification of expenses that

are in the nature of restructuring cost.

A restructuring is :

sale or termination of a line of business;

closure of business locations;

changes in management structure; or

fundamental reorganisations.

Restructuring provisions should be recognised as follows:

Sale of operation: recognise a provision only after a binding sale

agreement.

Closure or reorganisation: recognise a provision only after a detailed

formal plan is adopted and has started being implemented, or

announced to those affected. A board decision of itself is insufficient.

Future operating losses: provisions are not recognised for future

operating losses, even in a restructuring.

Restructuring provision on acquisition: recognise a provision only if

there is an obligation at acquisition date.

Restructuring provisions should include only direct expenditures necessarily

entailed by the restructuring, not costs that associated with the ongoing

activities of the entity.


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Contingent liabilities and assets

A contingent liability is:

(a) a possible obligation that arises from past events and whose existence

will be confirmed only by the occurrence or non-occurrence of one or

more uncertain future events not wholly within the control of the entity;

or

(b) a present obligation that arises from past events but is not recognised

because:

(i) it is not probable that an outflow of resources embodying

economic benefits will be required to settle the obligation; or

(ii) the amount of the obligation cannot be measured with sufficient

reliability.

A contingent asset is a possible asset that arises from past events and

whose existence will be confirmed only by the occurrence or non-occurrence

of one or more uncertain future events not wholly within the control of the

entity.

An entity shall not recognise contingent assets or liabilities.

Appendix A of Ind AS 37 provides guidance on (a) how a contributor account

for its interest in a fund and (b) when a contributor has an obligation to make

additional contributions, for example, in the event of the bankruptcy of

another contributor or if the value of the investment assets held by the fund

decreases to an extent that they are insufficient to fulfil the fund’s

reimbursement obligations, how that obligation be accounted for. The

Appendix prescribes that the contributor shall recognise its obligation to pay

decommissioning costs as a liability and recognise its interest in the fund

separately unless the contributor is not liable to pay decommissioning costs

even if the fund fails to pay. When a contributor has an obligation to make

potential additional contributions, this obligation is a contingent liability that is

within the scope of Ind AS 37. The contributor shall recognise a liability only

if it is probable that additional contributions will be made.

Appendix B of Ind AS 37 provides guidance on the recognition, in the

financial statements of producers, of liabilities for waste management under

the European Union’s Directive on Waste Electrical and Electronic

Equipment (WE&EE), in respect of sales of historical household equipment.


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This Appendix addresses neither new waste nor historical waste from

sources other than private households. The liability for such waste

management is adequately covered in Ind AS 37. However, if, in national

legislation, new waste from private households is treated in a similar manner

to historical waste from private households, the principles of this Appendix

apply by reference to the hierarchy in paragraphs 10-12 of Ind AS 8. The Ind

AS 8 hierarchy is also relevant for other regulations that impose obligations

in a way that is similar to the cost attribution model specified in the EU

Directive.

Appendix C to Ind AS 16 addresses the accounting for a liability to pay a levy

if that liability is within the scope of Ind AS 37. It also addresses the

accounting for a liability to pay a levy whose timing and amount is certain.

The Appendix prescribes that obligating event that gives rise to a liability to

pay a levy is the activity that triggers the payment of the levy, as identified by

the legislation. An entity does not have a constructive obligation to pay a levy

that will be triggered by operating in a future period as a result of the entity

being economically compelled to continue to operate in that future period.

The liability to pay a levy is recognised progressively if the obligating event

occurs over a period of time.


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Ind AS 38, Intangible Assets The objective of this Standard is to prescribe the accounting treatment for

intangible assets that are not dealt with specifically in another Standard. This

Standard requires an entity to recognise an intangible asset if, and only if,

specified criteria are met. The Standard also specifies how to measure the

carrying amount of intangible assets and requires specified disclosures about

intangible assets.

Intangible assets meeting the relevant recognition criteria are initially

measured at cost, subsequently measured at cost or using the revaluation

model, and amortised on a systematic basis over their useful lives (unless

the asset has an indefinite useful life, in which case it is not amortised).

An intangible asset is an identifiable (either being separable or arising from

contractual or other legal rights), non-monetary asset without physical

substance.

Intangible assets can be acquired:

• by separate purchase as part of a business combination;

• by a government grant;

• by exchange of assets; and

• by self-creation (internal generation).

An intangible asset shall be recognised only if:

(a) it is probable that the expected future economic benefits that are

attributable to the asset will flow to the entity; and

(b) the cost of the asset can be measured reliably.

An entity shall assess the probability of expected future economic benefits

using reasonable and supportable assumptions that represent management’s

best estimate of the set of economic conditions that will exist over the useful

life of the asset.

An intangible asset shall be measured initially at cost.

Separately acquired intangible assets

The cost of a separately acquired intangible asset comprises:


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(a) its purchase price, including import duties and non-refundable

purchase taxes, after deducting trade discounts and rebates; and

(b) any directly attributable cost of preparing the asset for its intended

use.

Intangible asset acquired in a business combination

As per Ind AS 103, Business Combinations, if an intangible asset is acquired

in a business combination, the cost of that intangible asset is its fair value at

the acquisition date. If an asset acquired in a business combination is

separable or arises from contractual or other legal rights, sufficient

information would exist to measure reliably the fair value of the asset.

In accordance with this Standard and Ind AS 103, an acquirer recognises at

the acquisition date, separately from goodwill, an intangible asset of the

acquiree, if it meets the definition and recognition criteria for an intangible

asset irrespective of whether the asset had been recognised by the acquiree

before the business combination. This means that the acquirer recognises as

an asset in-process research and development project of the acquiree if the

project meets the definition of an intangible asset.

Internally generated goodwill shall not be recognised as an asset.

Research phase

Intangible asset arising from research (or from the research phase of an

internal project) shall not be recognised. Expenditure on research (or on the

research phase of an internal project) shall be recognised as an expense

when it is incurred.

Development phase

An intangible asset arising from development (or from the development

phase of an internal project) shall be recognised only if, an entity can

demonstrate all of the following:

(a) the technical feasibility of completing the intangible asset so that it will

be available for use or sale.

(b) its intention to complete the intangible asset and use or sell it.

(c) its ability to use or sell the intangible asset.


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(d) how the intangible asset will generate probable future economic

benefits. Among other things, the entity can demonstrate the existence

of a market for the output of the intangible asset or the intangible asset

itself or, if it is to be used internally, the usefulness of the intangible

asset.

(e) the availability of adequate technical, financial and other resources to

complete the development and to use or sell the intangible asset.

(f) its ability to measure reliably the expenditure attributable to the

intangible asset during its development.

Internally generated brands, mastheads, publishing titles, customer lists and

items similar in substance shall not be recognised as intangible assets.

The cost of an internally generated intangible asset is the sum of expenditure

incurred from the date when the intangible asset first meets the recognition

criteria and the condition relating to development phase. Ind AS 38 prohibits

reinstatement of expenditure previously recognised as an expense.

Recognition of Expenses

Expenditure on an intangible item shall be recognised as an expense when it

is incurred unless:

(a) it forms part of the cost of an intangible asset that meets the

recognition criteria; or

(b) the item is acquired in a business combination and cannot be

recognised as an intangible asset. If this is the case, it forms part of

the amount recognised as goodwill at the acquisition date (see Ind AS

103).

Expenditure on an intangible item that was initially recognised as an expense

shall not be recognised as part of the cost of an intangible asset at a later

date.

Measurement of intangible assets

An entity shall choose either the cost model or the revaluation model as its

accounting policy. If an intangible asset is accounted for using the

revaluation model, all the other assets in its class shall also be accounted for

using the same model, unless there is no active market for those assets.


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Cost model

After initial recognition, an intangible asset shall be carried at its cost less

any accumulated amortisation and any accumulated impairment losses.

Revaluation model

After initial recognition, an intangible asset shall be carried at a revalued

amount, being its fair value at the date of the revaluation less any

subsequent accumulated amortisation and any subsequent accumulated

impairment losses. For the purpose of revaluations under this Standard, fair

value shall be measured by reference to an active market. Revaluations shall

be made with such regularity that at the end of the reporting period the

carrying amount of the asset does not differ materially from its fair value

The revaluation model is applied after an asset has been initially recognised

at cost. However, if only part of the cost of an intangible asset is recognised

as an asset because the asset did not meet the criteria for recognition until

part of the way through the process, the revaluation model may be applied to

the whole of that asset. Also, the revaluation model may be applied to an

intangible asset that was received by way of a Government grant and

recognised at a nominal amount

Treatment of Revaluation Gains and Losses

If an intangible asset’s carrying amount is increased as a result of a

revaluation, the increase shall be recognised in other comprehensive income

and accumulated in equity under the heading of revaluation surplus.

However, the increase should be recognised in profit or loss to the extent

that it reverses a revaluation decrease of the same asset previously

recognised in profit or loss.

If an intangible asset’s carrying amount is decreased as a result of a

revaluation, the decrease should be recognised in profit or loss. However,

the decrease should be recognised in other comprehensive income to the

extent of any credit balance in the revaluation surplus in respect of that

asset.


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Useful life

Useful life is:

(a) the period over which an asset is expected to be available for use by

an entity; or

(b) the number of production or similar units expected to be obtained from

the asset by an entity.

The accounting for an intangible asset is based on its useful life. An

intangible asset with a finite useful life is amortised, and an intangible asset

with an indefinite useful life is not.

Many factors are considered in determining the useful life of an intangible

asset.

Review of Useful Life Assessment

The useful life of an intangible asset that is not being amortised should be

reviewed each period to determine whether events and circumstances

continue to support an indefinite useful life assessment for that asset. If they

do not, the change in the useful life assessment from indefinite to finite

should be accounted for as a change in an accounting estimate

Derecognition

An intangible asset should be derecognised on disposal or when no future

economic benefits are expected from its use or disposal.

The gain or loss arising from the derecognition of an intangible asset should

be determined as the difference between the net disposal proceeds, if any,

and the carrying amount of the asset. It should be recognised in profit or loss

when the asset is derecognised (unless Ind AS 116 requires otherwise on a

sale and leaseback). Gains should not be classified as revenue.

The disposal of an intangible asset may occur in a variety of ways (e.g. by

sale, by entering into a finance lease, or by donation). The date of disposal of

an intangible asset is the date that the recipient obtains control of that asset

in accordance with the requirements for determining when a performance

obligation is satisfied in Ind AS 115, Revenue from Contracts with

Customers. Ind AS 116 applies to disposal by a sale and leaseback.


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Appendix A of Ind AS 38 provides guidance on whether the web site is an

internally generated intangible asset that is subject to the requirements of Ind

AS 38; and the appropriate accounting treatment of such expenditure. The

Appendix prescribes that an entity’s own web site that arises from

development and is for internal or external access is an internally generated

intangible asset that is subject to the requirements of Ind AS 38. Any internal

expenditure on the development and operation of an entity’s own web site

shall be accounted for in accordance with Ind AS 38. The nature of each

activity for which expenditure is incurred (eg training employees and

maintaining the web site) and the web site’s stage of development or post-

development shall be evaluated to determine the appropriate accounting

treatment. A web site that is recognised as an intangible asset under this

Appendix shall be measured after initial recognition by applying the

requirements of Ind AS 38. The best estimate of a web site’s useful life

should be short.


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Ind AS 40, Investment Property The objective of this Standard is to prescribe the accounting treatment for

investment property and related disclosure requirements.

Definitions

Investment property is property (land or a building, or part of a building, or

both) held (by the owner or by the lessee as a right of use asset) to earn

rentals or for capital appreciation or both, rather than for:

(a) use in the production or supply of goods or services or for administrative

purposes; or

(b) sale in the ordinary course of business.

Owner-occupied property is property held (by the owner or by the lessee

as a right-of-use asset) for use in the production or supply of goods or

services or for administrative purposes.

An owned investment property should be recognised as an asset only when:

(a) it is probable that the future economic benefits that are associated with

the investment property will flow to the entity; and

(b) the cost of the investment property can be measured reliably.

An owned investment property should be measured initially at its cost.

Transaction costs should be included in the initial measurement.

An investment property held by a lessee as a right-of-use asset shall be

measured initially at its cost in accordance with Ind AS 116.

When a lessee measures fair value of an investment property that is held as

a right-of-use asset, it shall measure the right-of-asset, and not the

underlying property at fair value.

An entity should adopt as its accounting policy the cost model to all of its

investment property. After initial recognition, an entity should measure

investment property:

(a) in accordance with Ind AS 105, Non-current Assets Held for Sale and

Discontinued Operations, if it meets the criteria to be classified as held

for sale (or is included in a disposal group that is classified as held for

sale);


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(b) in accordance with Ind AS 116, Leases if it is held by a lessee as a

right of use asset and is not held for sale in accordance with Ind AS

105; and

(c) in accordance with the requirements in Ind AS 16 for cost model in all

other cases.

The Standard requires all entities to measure the fair value of investment

property, for the purpose of disclosure.

Transfer

An entity should transfer a property to, or from, investment property only

when, there is a change in use. A change in use occurs when the property

meets, or ceases to meet, the definition of investment property and there is

evidence of the change in use. In isolation, a change in management’s

intentions for the use of a property does not provide evidence of a change in

use.

Transfers between investment property, owner-occupied property and

inventories do not change the carrying amount of the property transferred

and they do not change the cost of that property for measurement or

disclosure purposes.

Disposal

An investment property should be derecognised (eliminated from the balance

sheet) on disposal or when the investment property is permanently withdrawn

from use and no future economic benefits are expected from its disposal.

When an entity decides to dispose of an investment property without

development, it should continue to treat the property as an investment

property until it is derecognised (eliminated from the balance sheet) and

should not reclassify it as inventory. Similarly, if an entity begins to redevelop

an existing investment property for continued future use as investment

property, the property remains an investment property and should not be

reclassified as owner-occupied property during the redevelopment.

Gains or losses arising from the retirement or disposal of investment property

should be determined as the difference between the net disposal proceeds

and the carrying amount of the asset and should be recognised in profit or

loss (unless Ind AS 116 requires otherwise on a sale and leaseback) in the

period of the retirement or disposal.


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Compensation from third parties for investment property that was impaired,

lost or given up should be recognised in profit or loss when the compensation

becomes receivable.

Disclosures

The owner of an investment property provides lessors’ disclosures about

leases into which it has entered as required by Ind AS 116. A lessee that

holds an investment property as a righ-of-use asset provides lessees’

disclosures as required by Ind AS 116 and lessors’ disclosures as required

by Ind AS 116 for any operating leases into which it has entered.

This Standard required an entity to disclose:

(a) its accounting policy for measurement of investment property.

(b) when classification is difficult, the criteria it uses to distinguish

investment property from owner-occupied property and from property

held for sale in the ordinary course of business.

(c) the extent to which the fair value of investment property (as measured

or disclosed in the financial statements) is based on a valuation by an

independent valuer who holds a recognised and relevant professional

qualification and has recent experience in the location and category of

the investment property being valued. If there has been no such

valuation, that fact shall be disclosed.

(d) the amounts recognised in profit or loss for rental income from

investment property and direct operating expenses arising from

investment property that generated rental income during the period as

well as that did not generate rental income during the period.

(e) the existence and amounts of restrictions on the realisability of

investment property or the remittance of income and proceeds of

disposal.

(f) contractual obligations to purchase, construct or develop investment

property or for repairs, maintenance or enhancements.

An entity shall also disclose the depreciation methods used; the useful lives

or the depreciation rates used, the gross carrying amount and the

accumulated depreciation (aggregated with accumulated impairment losses)

at the beginning and end of the period and a reconciliation of the carrying


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amount of investment property at the beginning and end of the period and

the fair value of investment property.

In the exceptional cases, when an entity cannot measure the fair value of the

investment property reliably, it shall disclose:

(i) a description of the investment property;

(ii) an explanation of why fair value cannot be measured reliably; and

(iii) if possible, the range of estimates within which fair value is highly

likely to lie.


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Ind AS 41, Agriculture The objective of this Standard is to prescribe the accounting treatment and

disclosures related to agricultural activity.

Agricultural activity is the management by an entity of the biological

transformation and harvest of biological assets for +sale or for conversion into

agricultural produce or into additional biological assets.

Agricultural produce is the harvested product of the entity’s biological assets.

A bearer plant is a living plant that:

(a) is used in the production or supply of agricultural produce;

(b) is expected to bear produce for more than one period; and

(c) has a remote likelihood of being sold as agricultural produce, except for

incidental scrap sales.

A biological asset is a living animal or plant.

Biological transformation comprises the processes of growth, degeneration,

production, and procreation that cause qualitative or quantitative changes in a

biological asset.

Costs to sell are the incremental costs directly attributable to the disposal of an

asset, excluding finance costs and income taxes.

A group of biological assets is an aggregation of similar living animals or

plants.

Harvest is the detachment of produce from a biological asset or the cessation of

a biological asset’s life processes.

An entity should recognise a biological asset or agricultural produce only

when:

(a) the entity controls the asset as a result of past events;

(b) it is probable that future economic benefits associated with the asset

will flow to the entity; and

(c) the fair value or cost of the asset can be measured reliably.

A biological asset should be measured on initial recognition and at the end of

each reporting period at its fair value less costs to sell, except where the fair


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value cannot be measured reliably, in which case it should be measured at

its cost less any accumulated depreciation and any accumulated impairment

losses.

Agricultural produce harvested from an entity’s biological assets should be

measured at its fair value less costs to sell at the point of harvest.

A gain or loss arising on initial recognition of a biological asset at fair value

less costs to sell and from a change in fair value less costs to sell of a

biological asset should be included in profit or loss for the period in which it

arises.

A gain or loss arising on initial recognition of agricultural produce at fair value

less costs to sell should be included in profit or loss for the period in which it

arises.

An unconditional government grant related to a biological asset measured at

its fair value less costs to sell should be recognised in profit or loss when,

and only when, the government grant becomes receivable.

An entity is required to make disclosures as prescribed in the Standard.


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List of applicable Indian Accounting Standards

Sr. No. Ind AS Name

1. 101 First-time Adoption of Indian Accounting Standards

2. 102 Share-based Payment

3. 103 Business Combinations

4. 104 Insurance Contracts

5. 105 Non-current Assets Held for Sale and Discontinued

Operations

6. 106 Exploration for and Evaluation of Mineral Resources

7. 107 Financial Instruments: Disclosures

8. 108 Operating Segments

9. 109 Financial Instruments

10. 110 Consolidated Financial Statements

11. 111 Joint Arrangements

12. 112 Disclosure of Interest in Other Entities

13. 113 Fair Value Measurement

14. 114 Regulatory Deferral Account

15. 115 Revenue from Contracts with Customers

16. 116 Leases

17. 1 Presentation of Financial Statements

18. 2 Inventories

19. 7 Statement of Cash Flows

20. 8 Accounting Policies, Changes in Accounting

Estimates and Errors

21. 10 Events after the Reporting Period

22. 12 Income Taxes

23. 16 Property, Plant and Equipment


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24. 19 Employee Benefits

25. 20 Accounting for Government Grants and Disclosure of

Government Assistance

26. 21 The Effects of Changes in Foreign Exchange Rates

27. 23 Borrowing Costs

28. 24 Related Party Disclosures

29. 27 Separate Financial Statements

30. 28 Investments in Associates and Joint Ventures

31. 29 Financial Reporting in Hyperinflationary Economies

32. 32 Financial Instruments: Presentation

33. 33 Earnings per Share

34. 34 Interim Financial Reporting

35. 36 Impairment of Assets

36. 37 Provisions, Contingent Liabilities and Contingent

Assets

37. 38 Intangible Assets

38. 40 Investment Property

39. 41 Agriculture


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Ind AS Implementation Initiatives The Institute of Chartered Accountants of India (ICAI) being the premier

accounting body in India has been engaged in formulation of Indian

Accounting Standards (Ind AS). Apart from formulation of Ind AS, the ICAI

has been taking various initiatives to get the members ready for

implementation of Ind AS. For this purpose, the ICAI had constituted a

Committee, namely, Ind AS Implementation Committee in the year 2011. The

Committee has been entrusted with the task of providing guidance to the

members on Indian Accounting Standards (Ind AS). For this purpose, the

Committee has been making relentless efforts in making this transition to Ind

AS smooth through its various initiatives such as issuance of Educational

Materials on Ind AS containing Frequently Asked Questions. For addressing

implementation related queries in a timely and speedy manner, an Ind AS

Technical Facilitation Group (ITFG) has been formed which is working hard

in providing timely clarifications to members and others concerned. Apart

from this, the Ind AS Implementation Committee organises Certificate Course

on Ind AS, conducts In-house training programmes on Ind AS for regulatory

bodies such as C&AG, IRDAI, CBDT, various departments of ministries etc.

and other corporate entities, develops e-learning modules on Ind AS,

organises seminars, awareness programmes on Ind AS and series of

webcasts on Ind AS.

Educational Material on Ind AS

In order to provide guidance to members on Ind AS and to ensure

implementation of these Standards in the same spirit in which these have

been formulated, the Committee issues Educational Material on Ind AS,

which contains summary of the respective Standard and Frequently Asked

Questions (FAQs) which are expected to be encountered while implementing

the Standards. Educational Materials on following Ind AS have so far been

issued by the Committee:

Educational Material on Ind AS 1, Presentation of Financial

Statements (Revised 2016)

Educational Material on Ind AS 2, Inventories (Revised 2016)

Educational Material on Ind AS 7, Statement of Cash Flows (Revised

2016)


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Educational Material on Ind AS 8, Accounting Policies, Changes in

Accounting Estimates and Errors

Educational Material on Ind AS 10, Events after the Reporting Period

Educational Material on Ind AS 16, Property, Plant and Equipment

Educational Material on Ind AS 18, Revenue (Revised 2017)

Educational Material on Ind AS 27, Separate Financial Statements and

Ind AS 28, Investments in Associates and Joint Ventures

Educational Material on Ind AS 37, Provisions, Contingent Liabilities

and Contingent Assets (Revised 2016)

Educational Material on Ind AS 101, First-time Adoption of Indian

Accounting Standards

Educational Material on Ind AS 103, Business Combinations

Educational Material on Ind AS 108, Operating Segments

Educational Material on Ind AS 110, Consolidated Financial

Statements

Educational Material on Indian Accounting Standard (Ind AS)

111, Joint Arrangements

Educational Material on Indian Accounting Standard (Ind AS)

115, Revenue from Contracts with Customers

Certificate Course on Ind AS

An extensive Certificate course on Ind AS is being organised by the Ind AS

Implementation Committee for educating members about Ind AS. The

duration of the course is 12 days. Classes are held at weekends. Apart from

the comprehensive theoretical aspects, this course sharpens the expertise

and excellence of the members of the ICAI through multiple case studies

across the industry and service sector. A certificate is awarded to the

participants after attending and satisfactorily completing the course and

passing the examination. Certificate Course on Ind AS exam is conducted on

second Sunday of every quarter end (i.e. March, June, September and

December). For further details about the course, click on the following link:

http://www.icai.org/post.html?post_id=3562&c_id=266.


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Ind AS Technical Facilitation Group (ITFG)

Pursuant to the issuance of roadmap for Ind AS implementation, Ind ASs are

applicable to certain companies from 1st April, 2016 on mandatory basis.

Following which, various issues related to the applicability of Ind

AS/Implementation under Companies (Indian Accounting Standards) Rules,

2015, are being raised by preparers, users and other stakeholders.

Considering the need to address various issues raised on urgent basis an

Ind AS Technical Facilitation Group (ITFG) has been constituted. The Group

issues clarification bulletins addressing implementation issues from time to

time. These clarifications are very useful to the members of the profession

and to other concerned stakeholders in proper understanding and

implementation of Ind AS and its roadmap. The Group is continuously in

receipt of various issues on Ind AS and the same are being considered to be

addressed at the earliest.

So far, 23 ITFG Clarification bulletins have been brought out addressing 162 issues.

Awareness programmes on Ind AS

The Committee also organises one/two days awareness programme on Ind

AS at various locations across the Country. In these awareness programmes,

training on the basic Standards which form the premise for preparation and

presentation of financial statements under Ind AS, such as, Ind AS related to

presentation of financial statements, consolidation, business combinations,

financial instruments, revenue recognition, first-time adoption etc. is

imparted. Difference between Ind AS and AS is also specifically covered in

order to educate the members and stakeholders about how accounting under

Ind AS would be different from AS. These awareness programmes are very

helpful for the participants in getting ready for implementing Ind AS.

Ind AS training programmes for Regulators, Corporates and other

organizations.

The Committee also organises in-house training programmes on Ind AS for

various regulators, organisations and corporate houses.

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